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

A number of recent hearings in the House of Representatives have focused on health policy issues, including: 

• An Oversight and Government Reform Federal Workforce Subcommittee hearing on H.R. 4489, the "Federal Employees Health Benefits Program Prescription Drug Integrity, Transparency, and Cost Savings Act." 
• A Science and Technology Committee hearing on "How Can NIST (National Institute of Standards and Technology) Better Serve the Needs of the Biomedical Research Community in the 21st Century?"
• An Energy and Commerce Oversight and Investigations Subcommittee hearing entitled "Anthem Blue Cross Premium Hike." 

In addition, today the House Energy and Commerce Health Subcommittee is holding a hearing on medical radiation, and on March 3, the Senate Homeland Security and Governmental Affairs Committee, Federal Financial Management Subcommittee will review oversight challenges in the Medicare Part D prescription drug program.   Two health care fraud hearings have been scheduled for Thursday, March 4. The House Judiciary Subcommittee on Crime, Terrorism and Homeland Security has scheduled a hearing entitled “The Enforcement of the Criminal Laws Against Medicare and Medicaid Fraud,"  and the House Appropriations Labor-HHS Committee is holding a hearing on "Combating Health Care Fraud and Abuse."

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The OIG has issued a report entitled “Recovery Audit Contractors' Fraud Referrals.” By way of background, CMS contracts with recovery audit contractors (RACs) to identify improper payments of Medicare Part A and Part B claims, and they receive contingency fees based on the amount of improper payments identified. While RACs are not responsible for reviewing claims for fraudulent activity, they are responsible for referring any cases of potential fraud they identify to CMS. In its review, the OIG found that RACs referred only two cases of potential fraud to CMS during the period of March 2005 through March 2008, while CMS reported receiving no potential fraud referrals from RACs during this period. The OIG notes that RACs do not receive contingency fees for such fraud cases, which may serve as a disincentive for RACs to refer cases of potential fraud to CMS. The OIG recommended that CMS: (1) determine the outcomes of the two referrals made during the demonstration project, (2) implement a system to track fraud referrals, and (3) require RACs to receive mandatory training on the identification and referral of fraud. CMS concurred with the recommendations.

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Today the Obama Administration released an 11-page summary of its health reform proposal in preparation for a bipartisan health reform summit scheduled for February 25, 2010. Among other things, the proposal includes a relatively-detailed discussion how the Administration would promote access to affordable insurance, address health care fraud and abuse proposals, and bridge the differences between the House and Senate reform proposals in other key areas. Items of note include the following:

• Access to Health Insurance – The Administration proposes expanding access to affordable insurance through a series of insurance market reforms, including an insurance purchasing pool; federal premium subsidies; a requirement that individuals buy insurance or pay a penalty (with exceptions); a requirement that employers defray costs employees receiving federal subsidies (with exceptions); expansion of Medicaid; and a new Health Insurance Rate Authority to provide federal assistance and oversight to states in conducting reviews of unreasonable rate increases and other insurance industry practices. There is no mention of establishing a public health insurance plan to compete with private insurers.
• Waste, Fraud and Abuse – The Presidential proposal includes a variety of program integrity provisions, which include: a comprehensive sanctions database; registration and background checks of billing agencies and individuals; expanded access to the Healthcare Integrity and Protection Data Bank; liability of Medicare administrative contractors for claims submitted by excluded providers; strengthened standards for facilities that seek reimbursement as community mental health centers; limiting debt discharge in bankruptcies of fraudulent health care providers or suppliers; expanded use of technology for real-time data review; sanctions for illegal distribution of a Medicare or Medicaid beneficiary identification or billing privileges; a study of universal product numbers/claims forms for selected items and services under the Medicare program; a state Medicaid prescription drug profiling requirement; extrapolation of Medicare Advantage risk adjustment errors to contract payment for a given year; modification of certain Medicare medical review limitations; establishment of a CMS-IRS data match to identify fraudulent providers; and prevention of delays in access to generic drugs.
• Cost-Containment Provisions – While the summary document does not include a detailed discussion of Medicare provider rate changes, it does include a limited number of cost containment/fiscal sustainability provisions, including: an adjustment in Medicare Advantage payments to reflect “unjustified coding patterns”; an excise tax on the most expensive health plans ($27,500 for a family plan) beginning in 2018 for all plans; and new Medicare Hospital Insurance taxes on high-income taxpayers.
• Industry Fees -- The President proposes a $33 billion fee on brand name pharmaceutical manufacturers over 10 years (up $10 billion from Senate plan), beginning in 2011; a $67 billion assessment on health insurers over 10 years beginning in 2014 (with certain exceptions); and an excise tax (rather than fee) on medical device manufacturers, raising $20 billion over 10 years, starting in 2013.
• Quality of Care – Although not discussed in the summary document, a separate description on the White House web site states the President’s plan would provide “incentives for doctors, and hospitals that improve quality while providing for better coordination that helps to reduce harmful medical errors and healthcare-acquired infections.” The plan also includes “innovative payment reforms so providers are rewarded for the quality of care they provide, rather than just additional tests or treatments.” Likewise, it would reward greater coordination of care between primary care providers and specialists.
• Part D Coverage Gap – The President’s proposal fills the Medicare Part D prescription drug "doughnut hole" by providing a $250 rebate to Medicare beneficiaries who reach the coverage gap in 2010, and then phasing down the coinsurance requirement so it is the standard 25 percent by 2020 throughout the coverage gap.
• Medicaid Matching Funds – The President would eliminate the Senate’s proposed enhanced Medicaid matching provision for Nebraska and instead provide additional federal financing for all states to support the expansion of Medicaid.
• CLASS Act – The White House endorses the Community Living Assistance Services and Supports (CLASS) Program, a voluntary, privately-funded long-term services insurance program, but makes a series of changes designed to “improve the CLASS program’s financial stability and ensure its long-run solvency.”

The Administration also has released a variety of background and summary documents on the White House Health Care Meeting website.

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CMS has posted new "Telemarketing FAQs" to supplement the OIG's recent revisions to its Special Fraud Alert on Telemarketing by Durable Medical Equipment Suppliers.  Among other things, the FAQs address circumstances under which DME suppliers can contact a beneficiary based on the receipt of a physician’s order.  For a more information, see our discussion on our sister blog, Life Sciences Legal Update.

 

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The Obama Administration has released its proposed federal budget for fiscal year (FY) 2011. In its budget documents, the Administration reaffirms its commitment to enacting health reform legislation, and it assumes $150 billion in federal savings attributable to health reform over the 2011-2020 period. The document states that the budget “supports health insurance reform” by expanding patient-centered health research on treatment effectiveness; increasing investment in health information technology, prevention, and wellness activities; and initiating Medicare payment reform demonstrations. Nevertheless, the budget does not outline comprehensive reform plans, nor does it repeat the sweeping Medicare and Medicaid budget savings proposals included in the Administration’s proposed FY 2010 budget. In other health policy areas, the budget would: expand funding for biomedical research, health centers for the medically underserved, and HIV/AIDS prevention and treatment; provide a six-month, $25.5 billion extension of the American Recovery and Reinvestment Act (ARRA) temporary increase in federal Medicaid matching funds; expand Medicare and Medicaid anti-fraud efforts; address high-risk billing activity associated with the Medicaid drug benefit; expand Food and Drug Administration (FDA) user fees; and fund an FDA to “provide regulatory pathways for new technologies such as biosimilars.”  A separate FDA press release on the budget proposal announces that the Administration is seeking $4.03 billion for the FDA in FY 2011, which is a 23% increase over the agency’s current $3.28 billion budget.  The following initiatives are the major components of the FDA's FY 2011 budget increase:  transforming food safety ($318.3 million); Protecting Patients Initiative ($100.8 million); advancing regulatory science ($25.0 million); and tobacco-related initiatives ($215.0 million).  Note that many provisions of the proposed budget would require Congressional approval to implement. To that end, Congress is holding a series of hearings on the proposal, including Senate Finance and House Energy and Commerce Committee hearings focusing on the health policy provisions of the budget. Several other budget hearings scheduled for the week of February 8 were postponed due to extreme weather conditions in the Washington, D.C. area.

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On January 28, 2010, Reed Smith Partner Elizabeth Carder-Thompson, in her capacity as president of the American Health Lawyers Association, attended the National Summit on Health Care Fraud, sponsored by the U.S. Department of Health and Human Services and the U.S. Department of Justice. Ms. Carder-Thompson’s observations on the summit are available on our sister blog, Life Sciences Legal Update. 

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On January 28, 2010, Reed Smith Partner Elizabeth Carder-Thompson, in her capacity as president of the American Health Lawyers Association, attended the National Summit on Health Care Fraud, sponsored by the U.S. Department of Health and Human Services and the U.S. Department of Justice. Ms. Carder-Thompson’s observations on the summit are available on our sister blog, Life Sciences Legal Update.

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On January 15, 2010, CMS issued a transmittal on “Various OIG Reports that have Medical Review Implications.”  The transmittal instructs Medicare contractors to take steps to strengthen program safeguards to prevent improper payment in areas identified by the HHS Office of Inspector General (OIG). Specifically, reports highlighted by CMS address negative pressure wound therapy pumps, ambulance transportation for skilled nursing facility residents, pressure reducing support surfaces, and hospice services. CMS instructs contractors to use the information contained in the OIG reports and follow the processes and procedures already in the Medicare Program Integrity Manual concerning data analysis, contractor strategies, and the progressive corrective action process.

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On January 28, 2010, HHS Secretary Sebelius and Attorney General Eric Holder are hosting a “National Summit on Health Care Fraud” to discuss innovative ways to eliminate health care fraud, waste, and abuse. The summit, an invitation-only event featuring public and private-sector representatives, is an outgrowth of the Administration’s Health Care Fraud Prevention & Enforcement Action Team (HEAT), announced in May 2009.  At the event, HHS is announcing that the President's proposed FY 2011 budget will include "historic support for anti-fraud efforts."

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The HHS Office of Inspector General (OIG) has issued a report entitled “Review of Medicare Payments for Selected Durable Medical Equipment Claims With the KX Modifier for Calendar Year 2006." According to the OIG, the KX modifier – which indicates that the supplier has the required documentation on file -- was not effective in ensuring that suppliers that submitted claims to Palmetto GBA in 2006 actually had the required supporting documentation on file. Based on a sample of 100 items, the OIG extrapolates that Palmetto GBA paid approximately $127 million to suppliers who did not have the required documentation on file for services in 2006. The OIG attributes these errors to ineffective edits that determined only whether the KX modifier was on the claim, but not whether the documentation actually was on file. The OIG made a series of recommendations to recover inappropriate payments and improve the effectiveness of the KX modifier.

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On January 13, 2010, the OIG released an update to its March 2003 Special Fraud Alert on Telemarketing by Durable Medical Equipment Suppliers. The Special Fraud Alert focuses on section 1834(a)(17) of the Social Security Act, which prohibits suppliers of DME, except under limited circumstances, from making unsolicited telephone calls to Medicare beneficiaries regarding the furnishing of a covered item. It also highlights the OIG's concerns about possible telemarketing practices by DME suppliers through the use of independent marketing firms. In the updated version of the Alert, the OIG adds that it "has also been made aware of instances when DME suppliers, notwithstanding the clear statutory prohibition, contact Medicare beneficiaries by telephone based solely on treating physicians’ preliminary written or verbal orders prescribing DME for the beneficiaries." According to the OIG, the "physician’s preliminary written or verbal order is not a substitute for the requisite written consent of a Medicare beneficiary."  

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The HHS Office of Inspector General (OIG) has published its annual solicitation of recommendations for developing new and modifying existing safe harbor provisions under the federal anti-kickback statute, as well as developing new OIG special fraud alerts. The comment deadline is March 1, 2010.  A status report on the comments received in response to last year's solicitation is set forth in Appendix D to the OIG’s latest semiannual report. 

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On December 15, 2009, HHS announced the latest expansion of the Medicare Fraud Strike Force, a multi-agency team of federal, state and local officials working to combat Medicare fraud through the use of data analysis techniques and an increased focus on community policing. The Strike Force is now operating in Brooklyn, Tampa and Baton Rouge, joining other teams in Miami, Los Angeles, Detroit, and Houston. Since its inception, the Strike Force has obtained more than 460 indictments for Medicare fraud involving a total of more than $1 billion in claims.

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According to a recent HHS Office of Inspector (OIG) report, "Aberrant Medicare Home Health Outlier Payment Patterns in Miami-Dade County and Other Geographic Areas in 2008," Miami-Dade County, Florida, was responsible for more Medicare home health outlier payments in 2008 than the rest of the country combined. Another 23 counties nationwide also exhibiting "aberrant" home health payment patterns, the OIG found. Among other things, the OIG reports that more than 85% of home health providers that received outlier payments of over $100,000 per beneficiary were located in Miami-Dade County, and outlier payments for claims with a primary diagnosis related to diabetes were eight times the national average in this area. The OIG recommend that CMS: (1) continue its efforts to cap individual home health provider annual outlier payments; (2) review and respond to providers with aberrant outlier payment patterns, and (3) continue with efforts to strengthen enrollment standards for home health providers. CMS concurred with the recommendations and noted it was taking regulatory steps to limit home health outlier payments.

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CMS has released its 2009 Medicare and Medicaid improper payment rates, reflecting a more complete accounting methodology and Medicare claims review process which has resulted in higher overall reported Medicare improper payment rates. Specifically, CMS is reporting a 2009 Medicare fee-for-service error rate of 7.8%, compared to 3.6% in 2008. The baseline composite Medicare Advantage error rate, based on payment year 2007, is 15.4 percent. The composite Medicaid error rate is 8.7%, compared to 10.5% the prior year. Separately, on November 23, President Obama issued an Executive Order on “Reducing Improper Payments and Eliminating Waste in Federal Programs.” The order directs various agencies and departments to intensify efforts to eliminate payment error, waste, fraud, and abuse in the major federal programs through a series of steps, including greater transparency in reporting significant payment errors; a focus on identifying and eliminating the highest improper payments; accountability for reducing improper payments among executive branch agencies and officials; and coordinated federal, state, and local government action in identifying and eliminating improper payments.

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The OIG has released its Semiannual Report to Congress for the second half of FY 2009. The OIG reports savings and expected recoveries totaling $20.97 billion for all of FY 2009, including $16.48 billion in implemented recommendations, $4 billion in investigative receivables, and $492 million in audit receivables. The OIG also excluded 2,556 individuals and organizations from participation in federal health care programs in FY 2009. In addition, the OIG reported 671 criminal actions associated with crimes against HHS programs and 394 civil actions, including False Claims Act and unjust enrichment suits filed in federal district court, Civil Monetary Penalties Law settlements, and administrative recoveries related to provider self-disclosure matters. The report also includes a review of significant OIG accomplishments during the semiannual reporting period. The OIG also has released its summary of “Top Management and Performance Challenges in the Department of Health and Human Services for Fiscal Year 2009.” This annual report highlights potential challenges associated with management of the Medicare program, including the integrity of Medicare provider and supplier enrollment processes and payment methodologies, and vulnerabilities associated with fraud and abuse and quality of care concerns.

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A recent Government Accountability Office (GAO) report, "Centers for Medicare and Medicaid Services: Deficiencies in Contract Management Internal Control Are Pervasive,” raises concerns that CMS contract management practices “increase the risk of improper payments or waste.” Among other things, based on the GAO’s review of a sample of 2008 CMS contract actions, the GAO concluded that least 84.3% of FY 2008 contract actions contained at least one instance where a key control was not adequately implemented (such as ensuring project officers certify invoices for payment). These deficiencies were due in part to a lack of agency-specific policies and procedures to help ensure proper contracting expenditures. The GAO also charges that CMS did not fully implement recommendations GAO made in 2007 to improve internal control over contracting and payments to contractors. The report warns that “continuing weaknesses in contracting activities and limited progress in addressing known deficiencies will continue to put billions of taxpayer dollars at risk of improper payments or waste.” The GAO makes 10 recommendations for developing policies to improve oversight and strengthen CMS’s control environment.  

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The OIG has issued a report examining the extent to which Medicare Drug Integrity Contractors (MEDICs) identify Medicare Part D prescription drug fraud and abuse. The OIG found that 87% of potential incidents identified by the MEDICs in FY 2008 were identified through external sources, such as complaints, rather than proactive methods such as data analysis. According to the OIG, the MEDICs’ use of innovative techniques for data analysis was hampered by problems with accessing and using Medicare prescription drug event and Part B data, along with the MEDICs lack of authority to directly obtain information from downstream entities such as pharmacies, pharmacy benefit managers, and physicians. The OIG made a series of recommendations to improve the MEDICs’ access to accurate and comprehensive data, some of which would require statutory and/or regulatory changes.

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A recent OIG report examines the extent to which practitioners have reassigned Medicare benefits – a mechanism by which Medicare practitioners allow third parties to bill and receive payment for services that they rendered. The OIG found 37% of the Medicare reassignments in 2007 should not have been active (usually because the practitioners were no longer employed by the party to which their reassignments were made). The OIG recommends that CMS: (1) implement its plans to revalidate practitioner enrollment information, (2) educate practitioners on the need to provide current information, (3) implement plans to update Provider Enrollment, Chain, and Ownership System (PECOS) from other data sources, and (4) follow up with practitioners for whom payments were made through reassignments that should not have been active. In response, CMS discussed steps it is taking to address these issues.  

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A number of Congressional committees have held hearings recently on health policy issues, including the following:

• A Senate Judiciary Committee hearing on "Effective Strategies for Preventing Health Care Fraud." 
• A House Energy and Commerce: Subcommittee on Oversight and Investigations hearing on “The High Cost of Small Business Health Insurance: Limited Options, Limited Coverage.”   
• A Senate Homeland Security and Governmental Affairs Committee hearing on "H1N1 Flu: Monitoring the Nation's Response."
• A Senate Veterans' Affairs Committee hearing on a variety of bills to modify health care programs for veterans, including legislation to establish pay-for-performance compensation mechanisms into Department of Veterans Affairs contracts with community-based outpatient clinics. 

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The OIG has released the Health Care Fraud and Abuse Control (HCFAC) Program Annual Report for FY 2008. 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 billion in health care fraud judgments and settlements in FY 2008. Including the FY 2008 recoveries, the HCFAC account has returned over $13.1 billion to the Medicare Trust Fund since the program began in 1997. Also during FY 2008, U.S. Attorneys' Offices opened 957 new criminal health care fraud investigations, and federal prosecutors had a total of 1,600 health care fraud criminal investigations pending. There were 588 defendants convicted for health care fraud-related crimes during the year. With regard to civil cases, the Department of Justice opened 843 new civil health care fraud investigations and had 1,311 civil health care fraud investigations pending at the end of the fiscal year.

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HHS has announced efforts to reduce Medicare fraud by preventing identity theft, featuring a new OIG brochure with tips for beneficiaries on protecting their personal information, avoiding common fraud schemes, and monitoring key documents (medical bills, Medicare summary notices and explanations of benefits, and credit reports).

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On October 15, 2009, the OIG published a notice that seeks information from organizations that believe they have the capability to be monitors of health care entities under quality-of-care CIA with OIG.  Such monitors typically are responsible for assessing the effectiveness, reliability, and thoroughness of the health care entity's: (1) internal quality control systems; (2) response to quality-of-care issues; (3) development and implementation of corrective action plans and the timeliness of such actions; (4) proactive steps to ensure that each patient receives care in accordance with basic care, treatment, and protection-from-harm standards; the governing regulations; and the policies and procedures required to be adopted under the CIA; and (5) in residential settings, compliance with staffing requirements. In making these assessments, the monitor conducts site visits, analyzes available data, observes facility and corporate-level committee meetings, and reviews relevant documents, and the monitor submits regular written reports to the provider and OIG. The OIG notes that in order to select an appropriate monitor for any individual quality-of-care CIA, the OIG consider, but is not limited to, selecting an organization that responds to this notice. Responses may be submitted to the OIG on an ongoing basis.

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On October 9, 2009, CMS issued a transmittal to contractors highlighting several HHS Office of Inspector General (OIG) reports with recommendations on addressing Medicare’s vulnerability to questionable claims. In particular, CMS cites OIG reports on Medicare Part B chemotherapy administration payments, nonphysicians who performed Medicare physician services, inappropriate Medicare payments for chiropractic services, and Medicare Part B billing for ultrasound. CMS directs contractors to review claims data for services mentioned in the OIG reports and take appropriate action (e.g., prepayment edits and reviews, postpayment reviews, and physician/supplier education), if the data warrants action. 

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The OIG has released its FY 2010 Work Plan, which outlines the audit, inspection, and investigative initiatives the OIG intends to conduct this year. The plan includes reviews affecting a wide range of Medicare and Medicaid-covered items and services. 

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On September 16, 2009, CMS published a final rule that implements a provision of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 that prohibits recouping Medicare overpayments from a provider or supplier that seeks a reconsideration from a Qualified Independent Contractor (QIC) and changes how interest is to be paid to a provider or supplier whose overpayment is reversed at subsequent administrative or judicial levels of appeal. The final rule describes the overpayments to which the limitation applies, how the limitation works in concert with the appeals process, and the change in CMS’s obligation to pay interest to a provider or supplier whose appeal is successful at levels above the QIC. The rule is effective November 16, 2009.

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The OIG has issued two reports regarding Medicare hospice services for beneficiaries in nursing facilities based on a sample of 2006 claims. The first report concentrates on Medicare coverage requirements for hospice services in nursing facilities. Based on its review, the OIG concludes that 82% of hospice claims for beneficiaries in nursing facilities did not meet at least one Medicare coverage requirement, and Medicare paid approximately $1.8 billion for these claims. The OIG recommends that CMS provide more education and guidance to hospices and strengthen monitoring in this area. The second report outlines the types and frequency of hospice services provided to beneficiaries residing in nursing facilities.

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An OIG report on “Beneficiary Utilization of Albuterol and Levalbuterol Under Medicare Part B” examines shifts in physician prescribing patterns that coincided with changes in CMS reimbursement policy. The OIG urges Congress and CMS to consider the impact of new coding and reimbursement decisions on prescribing practices. In particular, the OIG notes that such policies could “limit access to a potentially more effective product” or drive utilization “toward a more expensive product that offers no clinical advantage.” The OIG states that it will continue to monitor drug utilization and payment policies to identify inappropriate Medicare payments.

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The HHS Office of Inspector General (OIG) has issued a report on the Medicaid Statistical Information System (MSIS) that concludes that MSIS data -- the only source of nationwide Medicaid claims and beneficiary eligibility information -- were not timely, accurate, or comprehensive for fraud, waste, and abuse detection. The OIG notes opportunities to improve and expand Medicaid data collection and reporting to further assist in fraud, waste, and abuse detection.  

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The Senate Homeland Security and Governmental Affairs Committee has approved S. 372, the "Whistleblower Protection Enhancement Act of 2009." Among other things, the Committee-approved bill would: clarify that federal employees are protected for disclosure of waste, fraud, or abuse made as part of an employee's job duties; clarify that whistleblowers may disclose evidence of censorship of scientific or technical information under the same standards that apply to other disclosures; and create a “Whistleblower Ombudsman” in every Inspector General office.  The panel also approved S.1508, the "Improper Payments Elimination and Recovery Act,” which would strengthen requirements for federal agencies to report and correct overpayment errors.  The bills now await consideration by the full Senate.

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The HHS Office of Inspector General (OIG) has issued it Annual Report on the State Medicaid Fraud Control Units (MFCU) for FY 2008. During this period, MFCUs: recovered more than $1.3 billion in court-ordered restitution, fines, civil settlements, and penalties; obtained 1,314 convictions; and reported 971 civil settlements and/or judgments. 

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The OIG has issued a report identifying a number of potential vulnerabilities associated with Medicare payment for Part B services billed by physicians but performed by nonphysicians under the "incident to" rule. In particular, the OIG raised concerns regarding the performance of invasive services by unqualified nonphysicians. The OIG recommends revisions to the "incident to" rule, including new limits on the circumstances under which physicians who do not personally perform the services may bill Medicare.  

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The OIG has issued a report entitled “Part B Services During Non-Part A Nursing Home Stays: Durable Medical Equipment.” The OIG found that $30 million was inappropriately allowed for DME during non-Part A skilled nursing facility stays in 2006, most of which were also certified by Medicaid. Also, the OIG found that nearly $11.9 million more was inappropriately allowed by Part B during Medicaid nursing facility stays and distinct-part nursing home stays providing primarily skilled care. The OIG recommends that CMS take a number of steps to prevent inappropriate payments.

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A new OIG report concludes that 86% of group 2 support surface claims for the first half of 2007 did not meet Medicare coverage criteria, resulting in an estimated $33 million in inappropriate payments. The OIG recommends that CMS take a series of steps to prevent improper payments for these products, including additional prepayment and postpayment medical reviews.

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A number of Congressional panels have held hearings recently on health policy issues, including the following:

• A Senate Commerce Subcommittee on Consumer Protection hearing on "Competition in the Health Care Marketplace." 
• A House Judiciary Subcommittee on Courts and Competition Policy hearing on "Biologics and Biosimilars: Balancing Incentives for Innovation.” 
• A House Energy and Commerce Oversight Subcommittee field hearing on "Terminations of Health Policies by Insurance Companies: State Perspectives and Legislative Solutions." 
• A House Judiciary Commercial and Administrative Law Subcommittee hearing on "Medical Debt - Is Our Healthcare System Bankrupting Americans?"

In addition, the following hearings and markups currently are scheduled:

 

• The Senate Special Committee on Aging is holding a hearing July 29 on medical research and education.
• On July 29, the Senate Homeland Security and Governmental Affairs Committee is voting on a number of bills, including S. 372, the "Whistleblower Protection Enhancement Act of 2009" and S.1508, the "Improper Payments Elimination and Recovery Act." 

 

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The Centers for Medicare & Medicaid Services (CMS) has issued a proposed rule to implement provisions from the Children's Health Insurance Program Reauthorization Act of 2009 with regard to the Medicaid Eligibility Quality Control (MEQC) and Payment Error Rate Measurement (PERM) programs. The rule also would also codify several procedural aspects of the process for estimating improper payments in Medicaid and the Children's Health Insurance Program (CHIP). CMS is accepting comments on the proposed rule until August 14, 2009. 

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The HHS Office of Inspector General (OIG) has issued a report entitled "Miscoded Claims for Power Wheelchairs in the Medicare Program." According to the OIG, 7% of Medicare standard rehabilitation power wheelchair claims and 23% of complex rehabilitation power wheelchair claims from the first half of 2007 were miscoded because the supplier used procedure codes that did not match the wheelchairs' model information. The OIG believes suppliers may need additional education on power wheelchair coding, and CMS can improve its review of power wheelchair claims.

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The OIG reports that 20 high-use counties with 6% of Medicare beneficiaries accounted for 16% of Part B spending on ultrasound services in 2007. In addition, the OIG believes that 3.2 million ultrasound claims (almost one in five nationwide) might be inappropriate. The OIG recommended that CMS monitor ultrasound claims data to detect and review questionable claims prior to payment, and take certain action when providers bill for high numbers of questionable claims; CMS concurred.

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On July 15, 2009, the Senate Committee on Health, Education, Labor, and Pensions (HELP) approved its health reform plan, the “Affordable Health Choices Act,” on a party-line 13-to-10 vote. In addition to significant insurance reforms, including a public health plan option, the legislation addresses a variety of other health policy issues, such as health care quality, health care workforce issues, preventive care, chronic care management, and a regulatory approval process for follow-on biologicals. The major features of the legislation are outlined below.

• Insurance Market Reforms: The bill includes various insurance market reforms, including guaranteed issue/renewability, a ban on pre-existing condition exclusions or lifetime/annual benefit limits, and a continuation of dependent coverage for children until the age of 26. Premium payments within each market may vary only by family structure, geographic region, actuarial value of benefits, tobacco use, and age (with limitations). Rates may not be based on gender, class of business, or claims experience. Health insurance policies would include incentives for care coordination, chronic disease management, and other health promotion activities, and cost-sharing would be limited for certain preventive services. These provisions would not apply to plans with enrollment prior to enactment, collective bargaining agreements ratified prior to enactment, or self-insured group health plans.
• Access to Insurance. The bill would establish an “Affordable Health Benefit Gateway” in each state to help qualified individuals and employer groups to purchase affordable health insurance. The Gateways must offer plans providing “essential health care benefits” meeting affordability standards and minimum coverage standards (states could require additional benefits but must assume additional costs). The bill also would establish a public health plan, dubbed the Community Health Insurance Plan, to ensure access to the essential health benefits package. The Secretary would be required to negotiate rates for provider reimbursement under the Community Health Insurance Plan, which may not be higher than the average of all Gateway reimbursement rates.
• Affordability of Coverage. The legislation would establish a new subsidy structure to support the purchase of private health insurance, including premium assistance and cost sharing limits. Credits will be provided on a sliding scale based on income (up to 400 percent of the poverty level) to enable families to purchase essential health care benefit plans through the Gateway. Credits also will be available for small businesses that pay 60 percent or more of their employees’ health insurance premiums.
• Insurance Mandates. Under the legislation, individuals would be required to have health coverage that meets minimum standards or face a financial penalty of up to $750 per year (with exemptions for individuals unable to access affordable care). Fees also would be assessed on employers who do not provide qualifying coverage for full- and part-time employees (with an exemption for employers with 25 or fewer employees).
• Improving Access to Health Care Services. Among other things, the legislation would increase spending for Federally Qualified Health Centers, the National Health Service Corps, and community-based mental and behavioral health services. A temporary reinsurance program would be created to reimburse employers who provide health benefits to retirees not yet eligible for Medicare in states without Gateways. The legislation also would create the Community Living Assistance Services and Supports (CLASS) program, a national insurance program financed through voluntary payroll deductions that would assist individuals unable to perform two or more functional activities of daily living. Under the CLASS program, cash benefits would be paid into a Life Independence Account to purchase nonmedical services and supports needed to maintain a beneficiary’s independence at home or in another residential setting, including home modifications, assistive technology, transportation, homemaker services, respite care, personal assistance services, home care aides, and added nursing support.
• Health Care Quality and Wellness. The legislation would require the HHS Secretary to establish a national strategy and support infrastructure to improve the quality of the U.S. health care system. Among other things, this strategy would include the development and dissemination of quality measures and the identification of best practices; improved care coordination; and updated standards for electronic health data interchange. In addition, the proposal would expand federal preventive health and wellness efforts through a new National Prevention, Health Promotion and Public Health Council. Funding also would be provided to, among other things: increase access to primary medical, dental, and behavioral health care services, particularly for targeted populations; promote community health and prevention efforts focusing on chronic diseases; support vaccination efforts; and identify and disseminate best practice information related to prevention and health impact assessments. The legislation also mandates that the FDA determine the usefulness of prescription drug fact boxes in advertising and other forms of communication.
• Health Care Workforce. The legislation includes a number of mechanisms to expand the health care workforce, enhance health care workforce education and training, and support the existing health care workforce. Among other things, a National Health Care Workforce Commission would be established to advise Congress on how to align federal health care workforce resources with national needs, and funding would be provided through a series of grant, scholarship, and loan programs.
• Fraud & Abuse Provisions. The legislation would establish a new Senior Advisor for Health Care Fraud within HHS and a Senior Counsel for Health Care Fraud Enforcement within the Department of Justice to coordinate each department’s health care fraud efforts. A Health Care Program Integrity Coordinating Council also would be created to provide additional federal health integrity coordination. The bill would strengthen enforcement authorities related to Multiple Employer Welfare Arrangements (MEWAs), including adding three crimes related to MEWAs to the list of federal health care offenses and prohibiting certain false statements in marketing materials. The bill also would create an optional federal privilege that would cover all confidential communications among state regulators (and the NAIC) and federal regulators to conduct regulatory oversight of covered entities. (Currently, entities must enter into a Memorandum of Understanding to protect such confidential communications.)
  Medical Therapies (Follow-on Biologicals & 340B Program). The legislation would establish a pathway for the licensure of a biological product based on similarity to a previously-licensed biological product (reference product). The FDA could not approve an application as biosimilar or interchangeable biological until 12 years from the date on which the reference product is first approved. In addition, if the FDA approves a biological product on the grounds that it is interchangeable to a reference product, no determination may be made that a second or subsequent biological product is interchangeable to that same reference product until one year after the first commercial marketing of the first interchangeable product. The legislation also includes provisions addressing patent infringement issues. Moreover, the bill includes a number of provisions that would modify the 340B Program, which allows certain safety-net providers to access discounts on pharmaceuticals. For instance, the bill would: expand the types of facilities eligible to participate in the drug discount program; address drugs used in connection with inpatient services, including allowing enrolled hospitals to obtain inpatient drugs through a group purchasing agreement or the 340B Prime Vendor Program; require enrolled hospitals to provide a credit to each state based on the estimated annual costs of covered drugs provided to Medicaid recipients for inpatient use; require the Secretary to enhance compliance with program requirements; establish an administrative process to resolve claims by covered entities and manufacturers regarding program violations; and clarify the ceiling price used to sell to 340B participants.

Note that the HELP Committee does not have jurisdiction over Medicare or Medicaid; provisions impacting those programs will be included in the Senate Finance Committee health reform bill, which is expected to be released in the coming days. After Finance Committee action, the two Committee packages then will be combined for consideration by the full Senate. In the meantime, three House Committees have begun markup of their updated, unified health reform plan; a section-by-section analysis and a summary of changes from an earlier draft package are available here.

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On July 15, 2009, CMS is hosting a Special Open Door Forum (ODF) on the Medicaid Integrity Program (MIP) Provider Audit Program.   The primary audience for this Special ODF is provider groups.  The call will take place from 1pm-2:30pm ET; to participate, dial 1-800-837-1935 and reference Conference ID# 17763217.

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The HHS Office of Inspector General (OIG) has issued a report on “Medicare Part B Chemotherapy Administration: Payment and Policy.” The OIG points out that while questionable claims exceeded $60 million from 2005 to 2007, Medicare data are insufficient to determine consistently whether chemotherapy administration payments are appropriate. The OIG recommends that CMS: (1) establish a process to determine which specific drugs qualify for the chemotherapy administration payment rate, (2) instruct carriers that have not done so to consider a probe review of unmatched chemotherapy administration claims, and (3) ensure that drug administration claims are coded correctly and paid appropriately.

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CMS is alerting providers that certain individuals are sending faxes to physician offices posing as the Medicare carrier or Medicare Administrative Contractor.  The fax instructs physician staff to respond to a questionnaire to provide account information within 48 hours in order to prevent a gap in Medicare payments.  CMS recommends that providers check with their contractor before submitting any information in response to such a solicitation, and to only send information to actual contractor addresses posted on the CMS web site. 

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The HHS Office of Inspector General (OIG) has posted its Semiannual Report to Congress for October 1, 2008–March 31, 2009. The OIG’s expected recoveries for this period include $274.8 million in audit-related receivables and $2.2 billion in investigative-related receivables (which includes nearly $552 million in non-HHS receivables resulting from OIG work, such as states’ share of Medicaid restitution). Also during this period, the OIG reported exclusions of 1,415 individuals and organizations for fraud or abuse involving federal health care programs and/or their beneficiaries; 293 criminal actions involving crimes against HHS programs; and 243 civil actions, including False Claims Act and unjust enrichment suits, CMP Law settlements, and administrative recoveries related to provider self-disclosure matters.

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A number of Congressional panels have held hearings recently on health policy issues, including the following:

• An Energy and Commerce Oversight and Investigations Subcommittee hearing on "Terminations of Individual Health Policies by Insurance Companies.”
• A Senate Homeland Security and Governmental Affairs Subcommittee on Oversight hearing on S. 372, the "Whistleblower Protection Enhancement Act of 2009."
• An Energy and Commerce Health Subcommittee hearing entitled "Medical Devices: Are Current Regulations Doing Enough for Patients?"

In addition, on June 24, 2009, the House Small Business Regulations and Healthcare Subcommittee is holding a hearing on "Health Information Technology and the New Challenges Faced by Solo and Small Group Healthcare Practices." Also on June 24, the Senate Homeland Security and Governmental Affairs Committee is holding a hearing on "Type 1 Diabetes Research: Real Progress and Real Hope for a Cure."

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The White House has proposed $313 billion in new Medicare and Medicaid cuts over 10 years, in addition to the provisions included in the Administration's proposed FY 2010 budget. Among other things, the Administration is endorsing: incorporating productivity adjustments into Medicare payment updates; reducing hospital subsidies for treating the uninsured as coverage increases; paying "better" prices for Medicare Part D drugs (including reducing reimbursement for beneficiaries dually eligible for Medicare and Medicaid); increasing the equipment utilization factor for advanced imaging from 50 percent to 95 percent; adopting MedPAC’s recommendations for 2010 payments to skilled nursing facilities, inpatient rehabilitation facilities, and long-term care hospitals; and cutting waste, fraud, and abuse (including prepayment review for physicians in high-risk areas or those that order a high volume of high-risk services such as durable medical equipment, home health, and home infusion services).

The following chart summarizes the Obama Administration's health reform financing proposals released to date:

Source	Health Care Reserve Fund ($ in billions)
	10 years
FY 2010 Budget -  Medicare and Medicaid Savings -  Revenues	$635 $309 $326
Additional Medicare and Medicaid Savings -  Incorporate productivity adjustments into Medicare payment      updates -  Reduce hospital subsidies for treating the uninsured as       coverage increases -  Pay better prices for Medicare Part D drugs -  Other	$313 $110  $106  $75 $22
Total	$948

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The OIG has released its annual “Compendium of Unimplemented Office of Inspector General Recommendations,” outlining previous OIG recommendations that the agency believes could achieve substantial savings and increase the effectiveness of HHS programs. Priority recommendations listed in the report address the following issue areas:

• Oversight of Medicare Part D -- Ensure accurate Medicare Part D sponsors bids and prospective payments; and implement safeguards to prevent and detect fraud and abuse in Medicare prescription drug plans.
• Medicare Integrity -- Ensure DME suppliers’ compliance with Medicare standards, modify Medicare hospital bad debt policy; reduce the rental period for Medicare home oxygen equipment; modify payments to managed care organizations; place a ceiling on administration costs included in managed care organizations’ rate proposals; and improve CMS performance evaluation process for program safeguard contractors.
• Medicaid and SCHIP Integrity -- Extend additional rebate payment provision to generic drugs; limit enhanced payments to cost and require that Medicaid payments returned by public providers be used to offset the federal share, resolve excessive Medicaid disproportionate share hospital payments; ensure Medicaid reimbursement for brand-name and generic drugs accurately reflects pharmacy acquisition costs, and link Medicaid drug rebate and drug reimbursement calculations.
• Quality of Care -- Ensure the appropriate processing of denial of Medicare payment remedies for noncompliant nursing homes; and improve Medicare hospice oversight.
• Oversight of Food, Drugs, and Medical Devices -- Update and maintain an accurate new drug code directory; improve FDA postmarketing oversight of drugs.
• Grants Management -- Increase oversight of NIH’s grantee institutions to ensure their compliance with federal financial conflict-of-interest regulations.
• Ethics Program Oversight and Enforcement -- Strengthen FDA oversight of clinical investigators.

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The OIG has released a report summarizing state fraud and abuse safeguard activities related to Medicaid NEMT. According to the OIG, such safeguard activities include screening providers, requiring prior approval for services, and other methods to prevent and detect improper payments. OIG also found that state Medicaid fraud control units investigated a total of 509 NEMT fraud and abuse cases from 2004 to 2006, with the most common types involving billing for services not rendered, unspecified overbilling, and upcoding.

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A number of Congressional panels have held hearings recently on health policy issues, including the following:

• A House Small Business Committee hearing on “Common Ground: Finding Consensus on Health Reform, the Small Business Perspective.”
• A Special Committee on Aging hearing on the value of long-term care insurance.
• A House Judiciary Courts and Competition Policy Subcommittee hearing on "Pay to Delay: Are Patent Settlements That Delay Generic Drug Market Entry Anticompetitive?"

In addition, the following hearings are scheduled this month:

• A June 10 House Education and Labor Subcommittee on Health hearing on “Examining the Single Payer Health Care Option."
• A June 11 the Senate Health, Education, Labor and Pensions Committee hearing on health care reform.
• A June 11 House Energy and Commerce Health Subcommittee hearing on "Emerging Health Care Issues: Follow-on Biologic Drug Competition." 
• A June 11 Senate Homeland Security and Governmental Affairs Subcommittee on Oversight hearing on S. 372, the "Whistleblower Protection Enhancement Act of 2009." 
• A June 18 House Energy and Commerce Health Subcommittee hearing entitled, "Medical Devices: Are Current Regulations Doing Enough for Patients?"

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On May 20, 2009, Attorney General Holder and HHS Secretary Sebelius announced the creation of a new interagency effort, the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to combat Medicare fraud. The HEAT team will include senior officials from Department of Justice (DOJ) and HHS who will build upon existing programs to combat fraud while investing new resources and technology to prevent fraud, waste, and abuse. Strike Force team operations also are being expanded to Detroit and Houston to fight Medicare fraud on a targeted, local basis. Other initiatives include: increasing Medicare provider compliance training; improving data sharing between CMS and law enforcement; and strengthening Medicare Advantage and Medicare Part D program integrity activities.  

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On May 20, 2009, the President signed into law the Fraud Enforcement and Recovery Act of 2009, which includes significant changes to the federal False Claims Act (FCA). Among other things, the new law expands the scope of FCA liability, provide for new investigative tools, and make it easier for qui tam relators to bring and maintain FCA suits on behalf of the government. Although the law is primarily targeted at potential fraud involving recipients of economic stimulus funds in the financial services industry, the FCA provisions also could affect members of the health care industry. A Reed Smith analysis of the Fraud Enforcement and Recovery Act of 2009 is available on Reed Smith’s Life Sciences Legal Update blog.

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A number of Congressional panels have held hearings recently on health policy issues, including the following:

• A Senate Judiciary Crime Subcommittee hearing on “Criminal Prosecution as a Deterrent to Health Care Fraud.” 
• A HELP Committee hearing on "Delivery Reform: The Roles of Primary and Specialty Care in Innovative New Delivery Models." 
• A House Oversight and Government Reform Committee hearing on H.R. 1507, the "Whistleblower Protection Enhancement Act of 2009."
• A House Energy and Commerce Health Subcommittee hearing on H.R. 1346, the "Medical Device Safety Act of 2009," which is discussed in greater detail at Reed Smith’s Life Sciences Legal Update blog. 

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The HHS Office of Inspector General (OIG) reports that in 2006, Medicare inappropriately paid a total net $178 million (out of $466 million) for chiropractic services that reviewers determined to be maintenance therapy, miscoded, or undocumented. The OIG recommends that CMS take a number of steps to address continuing vulnerabilities in this area, including implementing a new modifier for chiropractic claims to indicate the start of a new episode and/or a cap on allowed chiropractic claims. CMS also should ensure that chiropractic claims are not paid unless documentation requirements are met. 

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A number of Congressional panels have held hearings recently on health policy issues, including the following:

• The Senate Finance Committee held a “roundtable” discussion on "Increasing Access to Health Care Coverage." 
• The Ways and Means Committee held two hearings on health reform, one focusing on employer-sponsored insurance and the other featuring a discussion with HHS Secretary Sebelius on the President’s principles for health care reform. 
• The Senate Health, Education, Labor and Pensions Committee held hearings on "Primary Health Care Access Reform: Community Health Centers and the National Health Service Corps"; “Learning from the States: Individual State Experiences with Health Care Reform Coverage Initiatives in the Context of National Reform"; and on the nomination of Margaret A. Hamburg to be Commissioner of Food and Drugs. 
• The Senate Aging Committee held a hearing on “solutions to stop Medicare and Medicaid fraud from hurting seniors and taxpayers”

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The HHS Office of Inspector General (OIG) has posted its first Monthly Recovery Update Report providing an accounting of steps the OIG is taking to safeguard ARRA funding, such as review of HHS agency spending plans and development of grant audit guides. It also outlines planned OIG activities, including audits of state use of increased Federal Medical Assistance Percentage spending and audits of agency grant award processes.

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This post was written by Scot T. Hasselman, Andrew C. Bernasconi, and Nathan R. Fennessy.

On April 28, both the U.S. Senate and the U.S. House of Representatives took steps that would provide sweeping changes to the federal False Claims Act ("FCA"). The bills would significantly expand the scope of FCA liability while at the same time make it easier for qui tam relators to bring and maintain FCA suits on behalf of the government.

In short, the bills are answers to a DOJ and relator’s counsel "wish list" that would eliminate 20 years of hard-fought defense jurisprudence. In addition, the House bill, for example, would eliminate the public disclosure jurisdictional bar and defense, which could allow a sworn federal agent to utilize information obtained in the course of official investigations to file FCA lawsuits as a relator, and to receive a portion of any financial recovery. The House bill would also eliminate any basic pleading standards by relators and allow relators’s attorneys to file fishing expeditions without any substantive basis of allegation. 

For additional information, please see Reed Smith's full alert.

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• On May 5, 2009, the Senate Finance Committee is hosting a “roundtable” discussion on "Increasing Access to Health Care Coverage."
• On May 6, the House Ways and Means Committee is holding a hearing on "Health Reform in the 21st Century," featuring HHS Secretary Kathleen Sebelius.  
• On May 6, 2009, the Senate Aging Committee is holding a hearing on “solutions to stop Medicare and Medicaid fraud from hurting seniors and taxpayers.”

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According to a new OIG review, Medicare spent an average of five times more per beneficiary on inhalation drugs in South Florida compared to the rest of the country, with the greatest spending differences attributable to the more expensive brand name drugs levalbuterol and budesonide. In addition, three-fourths of South Florida beneficiaries receiving budesonide frequently exceeded coverage guidelines set forth in local coverage policy. The OIG recommends that CMS ensure that its contractors are enforcing the coverage guidelines for inhalation drugs, eliminate Medicare’s vulnerability to potentially fraudulent or excessive inhalation drug claims in South Florida, and review and act on cases where the DME supplier appears to be fraudulently billing Medicare for inhalation drugs.

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The OIG has issued a report entitled "Nursing Home Corporations Under Quality of Care Corporate Integrity Agreements."  The OIG reviewed all nursing homes that were placed under CIAs between June 2000 and December 2005, and found that all 15 corporations enhanced quality of care structures and processes while under their CIA and cited positive effects of the CIA, although challenges were encountered when implementing the CIA requirements. All 15 corporations had written policies and procedures regarding quality of care, codes of conduct, and training required by their CIAs; monitored their quality of care using standardized data, internal self-assessment tools, and by tracking complaints; and created or expanded their compliance infrastructures to integrate quality of care. Based on the report’s findings, areas that OIG will explore for its oversight of future CIAs include: responding swiftly to noncompliant corporations and those that fail to address quality problems; including in the CIAs specific requirements for documentation of nursing home Quality Assessment and Assurance activities; and sharing lessons learned by corporations and quality monitors with other corporations placed under subsequent CIAs.

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The HHS Office of Inspector General (OIG) has issued a report entitled “MedicaidPayments for Outpatient Clinical Diagnostic Laboratory Services for Dual-Eligible Beneficiaries.” The OIG found that Medicaid programs in 8 of 11 selected states spent a total of $1.3 million in potential improper payments for clinical diagnostic laboratory services that were provided on an assignment-related basis to Medicare/Medicaid dual eligibles in FY 2005 and 2006. Over half of the potential improper payments identified corresponded to five Current Procedural Terminology codes (36415, 85025, 80053, 81000, and 87536). The OIG points out that state Medicaid programs should not pay for any portion of outpatient clinical diagnostic laboratory services that were provided on an assignment-related basis to dual eligibles who are enrolled in Medicare Part B.

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On May 4 and 5, 2009, CMS is hosting two information sessions on the RAC program, under which four designated contractors will review all Medicare paid claims to identify Medicare overpayments and underpayments. The RACs will be paid a contingency fee based on overpayments and underpayments they find. The upcoming sessions will take place at the CMS San Francisco Regional Office and will feature the RAC for California, HealthDataInsights, Inc.   Registration is required.

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A number of Congressional panels have scheduled hearings on health policy issues, including the following:

• An April 21, 2009 Senate Finance Committee hearings on "Reforming America's Health Care Delivery System”;
• A Ways and Means Committee hearing on April 22 regarding reforming the health insurance market;
• An April 22 Senate Homeland Security and Governmental Affairs Committee hearing on "Eliminating Waste and Fraud in Medicare and Medicaid";
• An April 22 House Transportation and Infrastructure Aviation Subcommittee hearing entitled "Oversight of Helicopter Medical Services"; and
• An April 23 House Education and Labor Health Subcommittee hearing on "Ways to Reduce the Cost of Health Insurance for Employers, Employees and their Families."

In addition, on April 21, 2009, the Senate Finance Committee has scheduled a vote on the nomination of Kathleen Sebelius to be Secretary of Health and Human Services.

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On April 2, 2009, the House and Senate approved separate budget resolutions (H.Con.Res. 85  and S.Con.Res. 13, respectively) that establish nonbinding spending and revenue frameworks for the Congressional committees for fiscal year (FY) 2010. Both bills include deficit-neutral “reserve funds” authorizing committees to adopt health reform measures if offsetting revenues are specified. Such reforms could include, among other things, provisions to make health coverage more affordable, expand access to insurance, improve quality, reduce health care costs, and preserve choice of providers and health plans. In a notable difference, the House bill would allow the Senate to use a procedure called reconciliation to approve health reform legislation by a simple majority, effectively blocking the minority’s ability to force Senate leaders to muster 60 votes in favor of a health reform bill. The House bill also would require the Committees on Ways and Means and Energy and Commerce each to identify $1 billion in health care savings over five years. The Senate adopted an amendment that would prohibit adoption of President Obama’s proposal to change the tax treatment of charitable contributions to pay for health reform. In addition, the House and Senate differ in their approach to fixing the Medicare physician fee schedule formula, which now would trigger an across-the-board payment cut of approximately 21% in 2010. Specifically, the Senate would require that any change to the physician fee schedule be done on a deficit-neutral basis, while the House allocates approximately $87 million over five years/$285 billion over 10 years to reform the formula. The Senate also calls for the importation of prescription drugs approved by the Food and Drug Administration (FDA) from a specified list of countries, and it would establish a deficit-neutral reserve fund to address Medicare and Medicaid reimbursement inequities that lead to access problems in rural areas. Both the House and Senate resolutions also provide up to $311 million for the Health Care Fraud and Abuse Control program for FY 2010. Lawmakers will work to iron out differences between the two measures when Congress returns from recess on April 20, 2009.

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On March 24, 2009, the HHS Office of Inspector General (OIG) released an “Open Letter to Health Care Providers” announcing refinements to the OIG's Self-Disclosure Protocol. In order to more effectively allocate resources, the OIG will no longer accept disclosure of a matter that involves only liability under the physician self-referral law in the absence of an anti-kickback violation. The OIG cautions that while it is narrowing the scope of the disclosure protocol for resources purposes, providers should “not to draw any inferences about the Government’s approach to enforcement of the physician self-referral law.” Moreover, the OIG is establishing a $50,000 minimum settlement amount for kickback-related submissions accepted into the self-disclosure protocol after March 24, 2009. The OIG will continue to analyze the facts and circumstances of each disclosure to determine the appropriate settlement amount.

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The OIG has added a new “Recovery Act Fund Oversight” section to its website. The OIG is responsible for assessing whether HHS is using $135 billion in American Recovery and Reinvestment Act (ARRA) funds in accordance with legal and administrative requirements and is meeting the Office of Management and Budget's accountability objectives. The new section of the website outlines the OIG's initial plans and provides links to related websites. For instance, the web site notes that the OIG will be examining CMS's plan for temporarily increasing the Medicaid Federal Medical Assistance Percentage and the controls in place to ensure that the increase is implemented as intended by the ARRA.

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The OIG has released a report entitled "Comparison of Prices for Negative Pressure Wound Therapy Pumps," which asserts that Medicare is overpaying for NPWT pumps. Among other things, the OIG found Medicare reimbursement for NPWT pumps is more than four times the average price paid by suppliers, which makes pumps “vulnerable to fraud, waste, and abuse." The OIG recommends that CMS use its inherent reasonableness authority to reduce the reimbursement amount for NPWT pumps and include pumps in DMEPOS competitive bidding. CMS also should educate suppliers of new pump models on the importance of communication with beneficiaries' treating clinicians and follow up on potentially-inappropriate claims. CMS generally concurred with the recommendations.

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The Government Accountability Office (GAO) is requesting the public’s help in identifying waste, fraud, abuse, or mismanagement associated with ARRA funds. Specifically, the GAO is urging private citizens, government workers, contractors, and others to report ARRA-related concerns to FraudNet, a hotline that processes allegations about federal agencies and federally funded programs. The ARRA requires GAO to issue bimonthly reviews of how selected states and localities are using funds. 

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CMS has scheduled two educational calls on the Recovery Audit Contractor (RAC) program, under which four designated contractors 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 call on April 8, 2009 is intended for Part A providers, while the second call on April 14 will focus on Part B providers. 

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The Government Accountability Office (GAO) has released a report entitled “Medicare: Improvements Needed to Address Improper Payments in Home Health.” The report examines the growth in Medicare home health spending and utilization linked to upcoding and other fraudulent practices, concentrating on a review of home health agencies (HHAs) in California, Florida, Louisiana, Nevada, Oklahoma, Texas, and Utah. The GAO recommends that CMS: consider verifying the criminal history of key officials named on an HHA enrollment application; provide additional information to physicians who's identification number was used to certify HHA plans of care; direct CMS contractors to conduct postpayment medical reviews on claims submitted by HHAs with high rates of improper billing identified through prepayment review; and issue rules to expand the types of improper billing practices that are grounds for revocation of billing privileges.

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The HHS Office of Inspector General (OIG) has issued a report on “Hospital Compliance With Medicare's Postacute Care Transfer Policy During Fiscal Years 2003 Through 2005.” Under the postacute care transfer policy, Medicare pays full prospective payments to hospitals that discharge inpatients to their homes, but for patients with certain diagnoses, payments to the hospital are reduced for discharges to certain post-acute care settings (such as skilled nursing facilities). The OIG estimated that hospitals improperly coded 15,051 claims as discharges to home rather than transfers to post-acute care, resulting in $24.8 million in overpayments. The OIG noted, however, that claims edits adopted by CMS in 2004 significantly decreased these types of overpayments. A separate OIG review examined “Medicare Payments to Managed Care Plans on Behalf of Deceased Enrollees.” The OIG found that CMS paid approximately $4.4 million to Medicare Advantage plans for coverage periods after the enrollees' months of death, although CMS had correctly stopped payments for the vast majority of the deceased enrollees.

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On February 26, 2009, the Obama Administration released its proposed federal budget for fiscal year (FY) 2010. Most significantly in terms of health policy, the proposal would establish a reserve fund of $633.8 billion over 10 years to finance health reform. While half of the reserve funds would come from tax increases on higher-income individuals, the rest would come from health system savings impacting a wide range of providers, health plans, and manufacturers. While additional details are expected to be released in the coming weeks, the following are highlights of the information released to date: 

• Medicare Advantage (MA) Payments. The budget would replace the current mechanism for establishing MA rates with a competitive system in which Medicare payments would be based upon an average of plans’ bids. The Administration estimates a savings of more than $175 billion over 10 years from this provision – approximately half of the health care savings in the budget proposal.
• Reducing Drug Prices. The Administration proposes establishing a regulatory pathway for approval of follow-on biologicals. Additionally, brand biologic manufacturers would be prohibited from reformulating existing products into new products to restart the exclusivity process. The Administration also would prevent drug companies from blocking generic drugs from consumers by prohibiting anticompetitive agreements between brand name and generic drug manufacturers intended to keep generic drugs off the market. The budget also would increase the Medicaid drug rebate for brand-name drugs from 15.1% to 22.1% of the average manufacturer price (AMP), apply the additional rebate to new drug formulations, and allow states to collect rebates on drugs provided through Medicaid managed care organizations. The budget also supports the Food and Drug Administration’s (FDA) efforts to allow Americans to buy drugs from other countries.
• Medicare and Medicaid Payment Accuracy/Program Integrity. The budget would expand CMS’s capacity to identify excessive payments and correct problems, such as through use of National Correct Coding Initiative edits for Medicaid claims. The budget also proposes to dedicate additional resources for oversight and program integrity activities related to the Medicare prescription drug program, MA, and Medicaid.
• Hospital/Post-Acute Care Bundling, Reduced Hospital Readmission Rates. The budget calls for bundling payments to hospitals and certain post-acute providers for services provided within 30 days after discharge from the hospital. In addition, hospitals with high rates of readmission would be paid less if patients are re-admitted to the hospital within the same 30-day period.
• Hospital Quality Improvement. The budget would link a portion of Medicare payments for acute inpatient hospital services to hospital performance on specific quality measures.
• Physician Payment System Reforms. The Administration supports “comprehensive, but fiscally responsible” reforms to the physician fee schedule formula.
• Cancer Research.  The budget includes over $6 billion in funding for the National Institutes of Health (NIH) to support cancer research.

Other Medicare/Medicaid health policy line-items identified in the budget charts include the following, among others: 

• Establishing survey and certification revisit and recertification user fees;
• Enabling physicians to form voluntary groups that coordinate care for Medicare beneficiaries and to receive performance-based payments for coordinated care;
• Addressing financial conflicts of interest in physician-owned specialty hospitals;
• Requiring the use of radiology benefit managers for Medicare imaging services;
• Aligning Medicare home health payments with costs; and
• Imposing higher Medicare drug benefit premiums on certain higher-income beneficiaries.

Note that many provisions of the proposed budget would require Congressional approval to implement. To that end, a number of Congressional committees have scheduled hearings on the budget proposal, including a March 10 Senate Finance Committee hearing focusing on the budget’s health care provisions.

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On March 5, 2006, the Senate Judiciary Committee approved an amended version of S.386, the "Fraud Enforcement and Recovery Act." Among other things, the bill would “clarify” that the False Claims Act was intended to extend to any false or fraudulent claim for government money or property, whether or not the claim is presented to a government official or employee, whether or not the government has physical custody of the money, and whether or not the defendant specifically intended to defraud the government. 

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The FDA has published a rule confirming the March 27, 2009 effective date for its November 12, 2008 direct final rule regarding CMPs prescribed by the Food and Drug Administration Amendments Act of 2007.

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CMS has released a Medicare Fraud and Abuse fact sheet to help providers identify and prevent fraud and abuse, and to guide providers if they suspect potential incidents of fraud.

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The OIG has issued a report entitled “Medicare Payments in 2007 for Medical Equipment and Supply Claims with Invalid or Inactive Referring Physician Identifiers.” The OIG reports that Medicare allowed almost $34 million in 2007 for medical equipment and supply claims with physician identification numbers that had never been issued or had been deactivated by CMS, including $5 million for claims with dates of service after the referring physicians had died. The OIG recommends that CMS take a number of steps to promote the accurate and appropriate use of physician identifiers, and CMS concurred with the recommendations.

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CMS has announced that a bid protest regarding the award of Recovery Audit Contractors (RAC) was settled on February 4, 2009. CMS will now continue with implementation of the RAC program, under which four designated contractors 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. 

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On January 20, 2009, CMS issued a letter to State Medicaid Directors advising states of their obligation to direct Medicaid providers to screen their employees and contractors for excluded persons.

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The HHS Office of Inspector General (OIG) has issued a report on the top management and performance challenges facing the HHS. Key areas identified by the OIG include: Medicare Part D oversight (including drug pricing and rebates, fraud and abuse safeguards, and access to accurate information); Medicare integrity (including DME fraud and competitive bidding); Medicare Advantage; Medicaid and State Children’s Health Insurance program integrity (including prescription drug fraud and pharmacy reimbursement); quality of care (including pay-for-performance, “never events,” and transparency of ownership and performance); emergency preparedness and response; oversight of food, drugs, and medical devices (including food safety and security, drug and medical device safety, and transparency of provider financial interests); grants management; integrity of information systems and the implementation of health information technology; and ethics program oversight and enforcement.

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December 29, 2008, CMS announced that it has revoked the billing privileges of more than 1,100 medical equipment suppliers in south Florida and the Los Angeles area as part of its DMEPOS High-Risk Suppliers Demonstration. In addition, CMS has suspended payments to a number of home health agencies (HHAs) in the Miami-Dade, Florida area. To further address waste, fraud, and abuse, CMS is implementing extensive pre- and post-payment review of claims submitted by ordering/referring physicians; validating claims submitted by physicians who order a high number of certain items or services by sending follow-up letters to these physicians; verifying the relationship between physicians who order a large number of home health services and the beneficiaries for whom they ordered those services; and identifying and visiting high risk beneficiaries to ensure they are appropriately receiving the services for which Medicare is being billed. 

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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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