CMS is hosting a series of Special Open Door Forum calls to solicit feedback on data elements for a new “Suggested Electronic Clinical Template for Home Health.” Specifically, CMS seeks input on a list of clinical elements within a Suggested Electronic Clinical Template that would assist physicians when documenting the home health face-to-face encounter for Medicare purposes. Calls are scheduled for April 22, May 8, June 19, and July 16, 2014.
While attention has been focused on Medicare physician payment data released by CMS yesterday, upcoming Sunshine Act data will shine a new spotlight on financial relationships between physicians and pharmaceutical and medical device companies – with potential FCA implications.
Last week marked the deadline for pharmaceutical and medical device manufacturers and group purchasing organizations (GPOs) to register with and submit aggregate 2013 payment and investment interest data to the Centers for Medicare & Medicaid Services (CMS) on certain financial relationships between themselves and physicians and teaching hospitals, as required by the Physician Payment Sunshine Act.1 In May, manufacturers and GPOs will be required to submit to CMS detailed 2013 payment data. With some exceptions, CMS will be making these data public by September 1, 2014. While the publicly available data are intended to provide more transparency for patients – to allow them to have a better understanding of the financial relationships between physicians and pharmaceutical and medical device companies – patients will certainly not be the only group interested in this public information. The Department of Health and Human Services (HHS) Office of the Inspector General (OIG), Department of Justice (DOJ), and relators’ attorneys will likely utilize these data to initiate investigations and support complaints under the federal False Claims Act (FCA). As with the recent release of the 2012 Medicare Part B Physician Fee Schedule data, members of the media will likely make inferences about certain financial relationships.
The U.S. government recovered $3.8 billion in settlements and judgments from civil cases involving fraud against the government in the fiscal year ending Sept. 30, 2013.2 Fiscal 2014 looks to be a record-breaking year, with ever-increasing civil settlements by major pharmaceutical companies.3
As the reporting deadlines approach, it is worth considering an interesting, and largely unknown, potential implication of the public availability of these data: How will it affect future FCA litigation? The publically available Sunshine Act data could become relevant to FCA litigation in a variety of ways; two in particular are discussed below.
Anti-Kickback Statute Violations
The data could give rise to suspicions of violations of the federal Anti-kickback Statute (AKS). The AKS makes it a criminal offense to knowingly and willfully offer or pay remuneration to induce the referral of, or arrange for the provisions of, federal health care program business.4 In other words, the law prohibits any person or entity from giving, receiving – or offering to give or receive – anything of value in return for or to induce referrals for businesses covered by Medicare, Medicaid, or any other federally funded health care program. Violators of the AKS face imprisonment, criminal, and civil fines, as well as exclusion from federal health care programs.5
It is easy to see how publishing information regarding payments from pharmaceutical and medical device manufacturers to physicians and teaching hospitals could implicate the AKS, and by extension, the FCA. The Patient Protection and Affordable Care Act (ACA) made explicit that violations of the AKS are also violations of the FCA.6 Any payment from a pharmaceutical or medical device manufacturer to a physician who prescribes a product manufactured by the company providing the payment could be viewed as potentially inappropriate remuneration intended to influence prescribing behavior.
Publically available information reported as a result of the Sunshine Act may also have off-label promotion implications. Notably, reports to CMS must include the name of the drug or the type of device that forms the basis of the payment.7 Tying the payment to a particular drug or type of device could raise suspicions of off-label promotion. A pharmaceutical or medical device manufacturer that promotes its products for uses for which the product has not yet been approved by the United States Food and Drug Administration (FDA), i.e., off-label uses, is at risk of FCA liability. A false claim can arise when a manufacturer promotes a product for off-label, non-covered uses (that is, for a use that both has not been approved by FDA and is not covered by the federal health care programs). Payments going to physicians who specialize in an area that is outside the scope of a pharmaceutical or medical device’s approved indication could necessarily raise suspicions that the manufacturer is promoting the product for unapproved uses.
Besides the risk of government identifying potential issues for further investigation and prosecution as a result of reported Sunshine Act data, private parties may also mine the publically available data. One substantial impediment to relators’ attorneys using Physician Sunshine Payment data in FCA litigation is the limitation that publicly available data cannot form the basis of a whistleblower claim.8 This is known as the public disclosure bar, although the effectiveness of this defense has been diminished with recent FCA amendments.
That said, the Sunshine Act data, even if not the basis of a claim, could nonetheless impact the litigation in many ways. For example, it could provide additional evidence for the government to review in reaching its decision whether to intervene in a qui tam action. Both OIG and DOJ could review the data before it is publicly available to assist in the determination that a given matter warrants intervention. Additionally, the publicly available data – beyond providing flavor in support of an FCA claim and assisting with meeting the heightened pleading standard associated with fraud allegations9 – could be a potential mine for plaintiff attorneys to locate areas of focus. Relators’ attorneys will no doubt track the data to ascertain potential problem drugs or companies about which they can then dedicate efforts to uncovering fraud and abuse in the federal health care system.
It remains to be seen how all of these risks will play out going forward. Courts will have to decide how these new data will fit into FCA litigation. OIG and DOJ will have to determine how much to rely on the new information. And relators’ attorneys will need to make decisions about how many resources to dedicate to mining the Sunshine Act data.
One potential consequence that we are already starting to see occur is that pharmaceutical and medical device manufacturers may halt or limit payments to physicians, and/or that physicians themselves will be reluctant to accept such payments, e.g., for research, for expenses associated with training on a device, and the like. Companies may decide to do so for a variety of reasons, including avoiding the administrative burdens associated with tracking and reporting such payments for purposes of the Sunshine Act, fear of FCA litigation, or for public relations reasons. Many physicians simply do not want their names publicized. It remains to be seen how these trends will evolve.
1 42 C.F.R. § 403.908(a).
2 DOJ Press Release, available at: http://www.justice.gov/opa/pr/2013/December/13-civ-1352.html. 3 See, e.g., DOJ Press Release, available at: http://www.justice.gov/opa/pr/2013/November/13-ag-1170.html.
4 42 U.S.C. § 1320a-7.
6 42 U.S.C. § 1320a-7b(g). Note that manufacturers may submit “assumptions documents” as part of Sunshine reporting. Although CMS stated in the preamble to the Sunshine regulations its belief that the contents of such documents “should not be made public,” it acknowledged that it could provide access to the documents during an audit or investigation by other HHS divisions, the Office of Inspector General, or the Department of Justice.
7 42 C.F.R. 403.94(c)(8).
8 31 U.S.C. § 3730(e)(4).
9 Fed. R. Civ. P. Rule 9(b).
This post was written by Paul Pitts.
California State Senator Ed Hernandez, O.D., Chair of the Senate Health Committee, has introduced legislation that would close an exception in state law that currently permits physicians to provide advanced imaging, anatomic pathology, radiation therapy, and physical therapy within their office or the office of their group practice. Under current law, the so-called “in-office exception” permits physicians to refer patients to their own practice for these services, which are typically ancillary to the primary service of the referring physician. If this legislation is adopted, California’s self-referral law would be more restrictive than the federal physician self-referral law, commonly referred to as the Stark law. Physicians in California residing outside of rural areas would be prohibited from referring any patients, regardless of source of payment, for advanced imaging, anatomic pathology, radiation therapy, and physical therapy performed by the referring physician’s own practice. The proposed legislation, Senate Bill 1215, is scheduled for an April 21, 2014 hearing before the Senate Business, Professions and Economic Development Committee. Comments on the legislation may be sent to the committee at State Capitol, Room 2053 Sacramento, California 95814.
The OIG has issued a report examining questionable Medicare billing for electrodiagnostic tests, which are used to evaluate patients who may have nerve damage and which the OIG has identified as an area vulnerable to fraud, waste, and abuse. According to the OIG, 4,901 physicians had questionable billing for Medicare electrodiagnostic tests in 2011, based on seven measures of questionable billing developed by the OIG (e.g., physicians with an unusually high percentage of electrodiagnostic test claims using modifier 59 or 25, physicians with an unusually high average number of miles between the physicians’ and beneficiaries’ locations, and physicians with an unusually high average number of electrodiagnostic test claims for the same beneficiary on the same day). These questionable claims totaled $139 million in 2011, with physicians in the New York, Los Angeles, and Houston areas having the highest total questionable billing. In response to these findings, the OIG recommend that CMS: increase its monitoring of billing for electrodiagnostic tests; provide additional guidance and education to physicians regarding electrodiagnostic tests, and take appropriate action regarding physicians identified as having inappropriate or questionable billing.
The clock is winding down for Congress to pass Medicare sustainable growth rate (SGR) formula reform legislation before the latest temporary spending patch expires at the end of the month and doctors again face steep cut in Medicare physician fee schedule (MPFS) payments. While there had been high hopes for a permanent reform once key committee leaders reached agreement on a bipartisan, bicameral SGR reform bill, financing the roughly $180 billion package (including funding for various expiring Medicare provisions) has been the sticking point. When the House of Representatives approved its version of the bill on March 14 (H.R. 4015), it relied on savings attributed to repeal of the ACA individual insurance mandate to finance the bill – a proposal which drew a veto threat from the Administration and which will not be considered by the Senate. On the other hand, Senate Finance Committee Chairman Wyden has suggested offsetting the costs by capturing savings from “overseas contingency operations” funds (future war spending that is not expected to be expended) or not offsetting the costs – neither of which would pass the House. Given this impasse, lawmakers are exploring another temporary fix, potentially through the end of 2014, with offsets for the smaller package likely to come from reductions in other Medicare spending. If Congress does not reach an agreement, MPFS payments will be subject to an approximate 24% cut on April 1, 2014 (although CMS announced in the final MPFS rule the conversion factor would be reduced by 20.1%, the Congressional Budget Office estimates that given other adjustments in the rule, the effective update to physician payments for 2014 will be a reduction of 23.7% if the rule goes into effect).
The four Durable Medical Equipment (DME) Medicare Administrative Contractor (DME MAC) medical directors have issued a joint open letter to physicians warning about “various marketing schemes” perpetrated by DME suppliers. Such methods cited by the DME MACs in a March 5, 2014 “Dear Physician” letter include unsolicited orders for medical equipment or supplies; advertisements that Medicare will provide the doctor with payment for patient referrals; or pre-completed medical necessity forms with instructions to just “Sign and Date Here.” The DME MACs note that doctors “are under no obligation to support or justify these supplier solicitations,” or to sign orders for items not initiated by the doctor or that were provided by the supplier without prior consultation. The letter suggests that physicians review the patient’s medical record before signing orders, and view with skepticism unsolicited orders for patients no longer in their care or who have not been seen in a long period of time. Physicians should document in the patient’s medical record the medical justification for any DME ordered. The letter also asks doctors to report suspected abuse to the OIG, which we note has long-standing concerns about DMEPOS supplier marketing practices. Particularly in light of tightened CMS requirements related to physician documentation of DMEPOS orders, the DME MACs’ open letter provides another reminder for suppliers to review their policies and practices in this area.
CMS Considering Innovative Episode-Based Payment Models for Outpatient Specialty Practitioner Services
CMS is requesting public comments on ways to structure new models for delivering and paying for Medicare outpatient specialty practitioner services. The first broad model CMS is considering is a procedural episode-based payment model, where the episode of care would be defined around an outpatient surgical or interventional procedure such as colonoscopy or cardiac catheterization. Payment under this model would include all related services furnished during the episode, such as practitioners’ services (e.g., anesthesia, pathology, and/or radiology), diagnostic tests, Medicare-covered prescription drugs, and if applicable, ambulatory surgical center or hospital outpatient department facility payments.
A second model being considered is described as a complex and chronic disease management episode-based payment model. In this case, the episode would be defined as a prolonged period of time for management of the condition by a specialist practitioner, and the bundle could contain the same comprehensive services as contemplated under the procedural interventional model. In both models, CMS is concentrating on care by specialist practitioners other than medical oncologists, since a potential oncology model is being developed on a separate track.
CMS is exploring these options under its Affordable Care Act authority to test innovative payment and service delivery models that have the potential to reduce program expenditures while preserving or enhancing the quality of care for Medicare, Medicaid and Children’s Health Insurance Program beneficiaries.
** Note that CMS has extended the comment period from March 13, 2014 until April 10, 2014.
The bipartisan leadership of the House Energy and Commerce Committee, House Ways & Means Committee, and Senate Finance Committee have released a consensus Medicare physician fee schedule reform bill expected to be considered by Congress before the latest temporary payment patch expires at the end of March. Highlights of H.R. 4015, the SGR Repeal and Medicare Provider Payment Modernization Act, include the following:
- The bill would repeal the statutory “Sustainable Growth Rate” (SGR) provision, which has called for deep cuts in Medicare rates in recent years. Congress has routinely stepped in to override the full application of the formula – most recently replacing a 20.1% cut scheduled to go into effect January 1, 2014 with a 0.5% update for the first three months of 2014 – but H.R. 4015 would offer a permanent fix.
- For five years (2014-2018) the bill would provide annual Medicare physician fee schedule updates of 0.5% during a transition period to a new quality-based system (thus for 2014, the temporary 0.5% update in place through March would be extended for the full year).
- Three current physician quality programs would be consolidated into a single value-based program called the “Merit-Based Incentive Payment System,” which starting in 2018 would tie payment to performance in four categories: quality; resource use; electronic health record meaningful use; and clinical practice improvement activities. Quality measures will be developed and updated in consultation with physicians and other stakeholders.
- The bill would provide bonus payments to providers who receive a significant portion of their revenue from an alternative payment model (APM) or patient centered medical home (PCMH); the threshold would begin at 25% in 2018 and increase over time.
- The measure includes a number of other provisions designed to improve payment accuracy for individual provider services, promote appropriate use criteria for certain advanced diagnostic imaging services, expand care coordination for individuals with chronic care, and expand the use of Medicare data for transparency and quality improvement.
A formal budget estimate for the package has not yet been released, although earlier versions of the plans have had 10-year costs of more than $121 billion over 10 years. The Committees have not yet identified what “offsets” would be used to pay for the package, but cuts impacting a broad range of health care provider types, health plans, and drug manufacturers have all been unofficially floated as options.
On February 24, 2014, CMS is hosting a town hall meeting to discuss the future of the Physician Compare website and how to improve the information presented to consumers. For instance, CMS is seeking feedback on additional measures that might help consumers identify quality care, and measures to accurately and completely represent the various Medicare specialties. CMS is also considering including additional information such as Board Certification and other medical qualifications. Related resources are posted on the CMS website. CMS is accepting written comments on this topic until March 3, 2014.
The Congressional Budget Office (CBO) has raised the specter that pending legislation to reform the Medicare physician fee schedule statutory update formula could increase the likelihood that the Affordable Care Act’s (ACA) Independent Payment Advisory Board (IPAB) mechanism would be triggered – potentially resulting in as much as $0.6 billion in Medicare provider cuts during the 2015-2023 period.
As previously reported, House and Senate panels are proceeding with plans to reform the unpopular “sustainable growth rate” (SGR) formula – the statutory provision that outlines how Medicare physician fee schedule rates are updated annually. In recent years, the formula has called for deep cuts in Medicare rates – although Congress has routinely stepped in with temporary patches to avert the full application of the formula. Most recently, the SGR contributed to a 20.1% cut in the Medicare physician fee schedule update for 2014 – but Congress approved the Bipartisan Budget Act of 2013 in December to replace that cut with a 0.5% increase for services provided only during the first three months of 2014. The temporary patch is intended to give lawmakers time to finalize pending bipartisan proposals to permanently repeal the SGR policy and replace it with a period of stable payment followed by reimbursement linked to quality of care.
Congressional panels tasked with drafting the SGR legislation have not yet revealed how they intend to pay for the costs of their bills. In the absence of such offsets, the CBO has estimated that the version of the legislation approved by the House Ways and Means Committee in December (H.R. 2810) would increase spending by about $121 billion over the 2014-2023 period, while the Senate Finance Committee package (S. 1871) would increase direct spending by $150.4 billion during that period. According to the CBO, such spending increases would result in the IPAB mechanism being triggered.
By way of background, under the ACA, the IPAB is charged with submitting detailed proposals to Congress and the President to reduce Medicare per-capita spending if projected spending growth exceeds a specified target based on inflation and growth in the economy, beginning in 2015. IPAB’s proposals will go into effect automatically unless Congress enacts alternative legislation to achieve the required savings (with certain exceptions). The IPAB is barred from submitting proposals that reduce Medicare payments prior to 2020 for providers that had reimbursement cuts under the ACA beyond a productivity adjustment (such as acute care hospitals, long-term care hospitals, inpatient rehabilitation facilities, and outpatient hospital services, among others), thereby potentially increasing the impact of the IPAB cuts on physicians and Medicare Advantage and Part D plan sponsors. Note that none of the 15 members of the IPAB have actually been nominated yet, so the panel currently exists in name only (but failure to appoint a panel would not forestall the cuts – if IPAB does not submit a plan, the responsibility falls to the HHS Secretary).
Last May, the CBO had projected that Medicare per-beneficiary spending would be below the IPAB triggers for fiscal years 2015 through 2023. In budget estimates released last week, however, the CBO estimates that under the House SGR reform bill, the IPAB mechanism would be required to produce a $0.5 billion reduction in Medicare spending over the 2015-2023 period. The Senate Finance SGR package would require even higher IPAB savings -- $0.6 billion over the same period.
Congressional negotiators finalizing the SGR package are expected to eventually identify their own spending offsets, which could impact spending on a potentially broader range of health care provider types, health plans, and drug manufacturers, but minimize the potential that the IPAB makes those decisions. The question now – if SGR reform actually proceeds -- is whether it will be Congress or the IPAB panel that identifies the offsetting savings. Either way, however, it appears that SGR reform could be a good news/bad news proposition, with long-overdue SGR reforms adopted, but at a currently-unknown price.
This post was written by Jillian W. Riley.
On January 16, 2014, the Food and Drug Administration (FDA) issued a final guidance document for industry providing specific recommendations on the content and format of Dear Health Care Provider (DHCP or “Dear Doctor”) letters. DHCP letters are an important means of communicating new information to the health care provider community about a product that is already on the market. The guidance provides insight into (1) when to send a DHCP letter, (2) what information should be included, (3) how to organize the letter, and (4) how to format the letter. The recent guidance finalizes a draft guidance FDA published in November of 2010.
The guidance stresses the importance of collaborating with FDA when crafting DHCP letters to ensure that a DHCP letter is appropriate under the circumstances, that the target audience has been identified, and that the message is clearly conveyed. Additionally, the guidance provides template examples to aid industry in drafting a clear and effective DHCP letter.
As part of its ongoing efforts to make Medicare data more transparent and accessible, CMS has ended its blanket restriction on disclosure of information about Medicare payments to individual physicians when requested under the Freedom of Information Act (FOIA). Instead, CMS will now consider on a case-by-case basis whether exemption 6 of FOIA, which requires CMS to balance the privacy interest of individual physicians against the public interest in disclosure of such information, applies to a given request for information pertaining to Medicare payments to individual physicians. CMS notes that since “the outcome of the balancing test will depend on the circumstances, the outcomes of these analyses may vary depending on the facts of each case.” In a blog post, CMS contends that potential benefits associated with release of such information could include:
- Allowing providers to collaborate on improved health care management and delivery at lower costs;
- Giving consumers broader, more reliable measures of provider quality and performance to drive innovation and competition while informing consumer choice; and
- Enabling journalists and others to identify waste, fraud, abuse, and unsafe practices.
In addition to reiterating its commitment to protecting the privacy of Medicare beneficiaries, CMS states that it intends “to consider the importance of protecting physicians’ privacy and ensuring the accuracy of any data released as well as appropriate protections to limit potential misuse of the information.” The official version of the notice will be published on January 17.
On January 9, 2014, the House Energy and Commerce Health Subcommittee is holding a hearing on “The Extenders Policies: What Are They and How Should They Continue Under a Permanent SGR (Sustainable Growth Rate) Repeal Landscape?” The so-called extenders are measures that secure the continuation of various temporary Medicare payment and policy revisions impacting hospitals, physicians, therapy providers, and certain other provider types that are routinely extended by Congress (most recently as part of the Pathway for SGR Reform Act).
On December 3, 2013, CMS will host a National Provider Call to provide an overview of the value-based payment modifier (VM) under the final 2014 Medicare Physician Fee Schedule final rule (which has not yet been released). CMS will also describe how the VM is aligned with the reporting requirements under the Physician Quality Reporting System (PQRS).
Despite continuing provider concerns, CMS has announced that it will direct Medicare administrative contractors (MACs) to activate controversial “phase 2” ordering/referral edits effective January 6, 2014. Once activated, MACs will deny claims for Medicare Part B services (including lab services and the technical component of imaging services), durable medical equipment, and Part A home health agency (HHA) services if the ordering/referring physician or other professional is not identified, is not in Medicare's enrollment records, or is not of a specialty type that may order/refer the service/item being billed. CMS had previously delayed an earlier May 1, 2013 target date for implementation due to objections by physicians and suppliers that they could experience claims denials and delays based on discrepancies between the names of the ordering physician on the 1500 claim form and in Medicare’s enrollment records. There has been no assurance from CMS, however, that these concerns have been fully resolved, and the only recourse for providers if claims are inappropriately denied claim will be to file an appeal. A CMS educational article accompanying the announcement suggests that imaging suppliers and providers bill global claims separately to prevent a denial for the professional component in the event that the new edits deny the technical component of imaging services.
The Patient-Centered Outcomes Research Institute (PCORI) was established by the ACA to support federal comparative effectiveness research efforts. Due to the resignation of a physician representative on the board, letters of nomination to fill the vacancy will be accepted through November 15, 2013.
Medicare electronic health records (EHR) incentive payments to hospitals and health care professionals topped $6.3 billion for 2012 – more than twice the $2.3 billion awarded for 2011 -- according to a GAO report entitled Electronic Health Records: Number and Characteristics of Providers Awarded Medicare Incentive Payments for 2011-2012. The proportion of eligible hospitals and professionals receiving payments also grew from 2011 to 2011, with 48% of eligible hospitals (2,291) receiving payments in 2012 compared to 777 hospitals (16%) in 2011. For 2012, 31% of eligible professionals (183,712) were awarded payments, up from 10% (58,331) in 2011. Among hospitals and professionals awarded an incentive payment for 2012, the largest proportions were in the South, the smallest proportions were in the West, and a majority were in urban areas. More than four-fifths of the hospitals were acute care hospitals and three-fifths were nonprofit hospitals, while more than half of professionals were specialty practice physicians.
As a result of the partial government shutdown, CMS is warning that it may delay until late November a series of major final rules setting a wide range of Medicare payment rates and policies for 2014. While CMS usually releases the final calendar year updates by November 1st each year, CMS is now saying that the 16-day government shutdown could push back the release date of the following rules to November 27th (or potentially later):
• CY 2014 Changes to the Hospital Outpatient Prospective Payment System (HOPPS) and Ambulatory Surgical Center (ASC) Payment System;
• Revisions to Payment Policies under the Physician Fee Schedule and Other Revisions to Part B for CY 2014;
• Medicare Program; End-Stage Renal Disease (ESRD) Prospective Payment System, Quality Incentive Program, and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS); and
• CY 2014 Home Health Prospective Payment System Final Rule.
This timeline could leave providers, suppliers, and other health care entities only a few weeks to prepare for potentially sweeping changes before they go into effect on January 1, 2014 (although certain provisions have different effective dates). For instance, stakeholder are awaiting final disposition of CMS proposals to, among many other things: expand payment bundles under the HOPPS; cut physician fee schedule reimbursement for more than 200 codes if the Medicare physician office payment exceeds the HOPPS or ASC payment; systematically reexamine payment amounts under the Clinical Laboratory Fee Schedule; establish a centralized review process for Investigational Device Exemption (IDE) coverage decisions; reduce ESRD rates by 9.4%; and revise various DMEPOS payment policies.
A recent OIG report links the growing presence of physician-owned distributorships, or PODs, to increased spinal surgery volumes and potentially increased Medicare costs. The OIG notes a “substantial presence” of PODs in the spinal device market, with PODs supplying spinal devices for 19% of the spinal fusion surgeries billed to Medicare in FY 2011. According to the OIG, hospitals that purchased devices from PODs performed more spinal surgeries in 2012 than hospitals that did not purchase from PODs, and hospitals increased the rate of growth in the number of spinal surgeries after they began purchasing from PODs. Hospitals identified surgeon preference as the strongest influence on their decisions to purchase spinal devices from PODs. The OIG also disagrees with PODs’ claims that their devices cost less than those from other suppliers; rather, in the categories examined by the OIG, the devices cost the same as or more than devices from companies not owned by physicians. This fact, coupled with increased volumes, according to the OIG, could increase overall Medicare costs over time. In addition, the OIG raises concerns about inconsistencies in hospital policies regarding physician disclosure of ownership to either hospitals or their patients of interests in PODs (although the OIG suggests that the new “Sunshine Act” disclosure rules may improve the ability of hospitals and patients to identify physicians’ investment in device companies). For a case urging an alternative perspective on PODs, see the report on our sister blog, http://www.lifescienceslegalupdate.com/, about a recent complaint filed in the U.S. District Court for the Central District of California that seeks a declaration that the OIG’s Special Fraud Alert on PODs unfairly and unconstitutionally burdens First Amendment rights of free speech and due process. The complaint defends the lawfulness of the physician-owned model, and characterizes the Fraud Alert as the result of a multi-year lobbying campaign by “Big Corporations” forced to compete with small physician-owned entities. For more details, see our full report.
The Government Accountability Office (GAO) has issued two reports on trends in physician referrals to entities in which the provider or the provider's family members have a financial interest – both of which conclude that financial incentives are likely a major factor driving increases in referrals. In the first report, “Medicare: Action Needed to Address Higher Use of Anatomic Pathology Services by Providers Who Self-Refer,” the GAO concentrates on three provider specialties -- dermatology, gastroenterology, and urology -- that in 2010 accounted for 90% of referrals for self-referred anatomic pathology services (the preparation and examination of tissue samples to diagnose disease). Among other things, the report found that referrals for anatomic pathology services by these specialists (specifically services represented by CPT code 88305) substantially increased the year after they began to self-refer, compared both to before they started self-referring and to those specialists who continued to self-refer or never self-referred services. Self-referring providers of these specialties also referred more services on average than non-self-referring providers, even taking into account geography and patient characteristics. In response to the GAO’s suggestion that CMS improve its ability to identify self-referred anatomic pathology services and limit financial incentives for high levels of referrals, HHS notes that it identified CPT code 88305 as a potentially misvalued code and reduced its reimbursement by approximately 30% percent in 2013, which HHS believes has significantly reduced the financial incentives associated with self-referral for these procedures.
In a second report, “Higher Use of Costly Prostate Cancer Treatment by Providers Who Self-Refer Warrants Scrutiny,” the GAO examined self-referral of prostate cancer-related intensity-modulated radiation therapy (IMRT) services. According to the GAO, from 2006 to 2010, the number of IMRT procedures performed by self-referring groups increased rapidly (from about 80,000 to 366,000), while it declined for non-self-referring groups. This growth in self-referred services was primarily due to limited-specialty groups, particularly urologists, rather than multispecialty groups. Self-referring groups also were more likely to refer their patients for IMRT than other less costly treatments (e.g., radical prostatectomy or brachytherapy). Because Medicare providers are generally not required to disclose that they self-refer IMRT services, the GAO states that “beneficiaries may not be aware that their provider has a financial interest in recommending IMRT over alternative treatments that may be equally effective, have different risks and side effects, and are less expensive for Medicare and beneficiaries.” The GAO recommended that CMS require providers to disclose their financial interests in IMRT to their patients; which HHS does not support because, among other things, it could be complex to administer and would not address overutilization. HHS also noted that the President has proposed excluding certain services from the in-office ancillary services exception to the physician self-referral law.