D.C. Circuit Rules in Favor of Providers in DSH Part C/Part A Appeal... Or Does it?

This post was written by Salvatore G. Rotella, Jr. and Zachary A. Portin

In a much-anticipated decision, the U.S. Court of Appeals for the District of Columbia Circuit last month affirmed the lower court’s ruling in favor of the hospital plaintiffs in Allina Health Services, et al. v. Sebelius (D.C. Cir., No. 13-5011, Apr. 1, 2014). The otherwise good news for providers, however, was called into question by the appellate court’s instructions as to the proper remedy in the case.

Allina involved a Part C/Part A issue challenge to the method that the Department of Health and Human Services (HHS) used to calculate the plaintiffs’ DSH payments for the 2007 cost year. Specifically, in undertaking the DSH calculation, HHS treated inpatient days of Part C beneficiaries (Part C Benefit Days) as days for which those patients were “entitled to benefits under Part A” of Medicare. HHS did so pursuant to a final rule it issued in 2004 (the 2004 Final Rule) and codified in a 2007 regulation.

Previously, the D.C. District Court had held in its Allina decision that the 2004 Final Rule was procedurally defective, and HHS was therefore required to treat Part C Benefit Days as days for which those patients were not entitled to benefits under Part A. That approach would generally have led to additional DSH reimbursement for hospitals. On appeal, the D.C. Circuit affirmed the lower court’s finding that the 2004 Final Rule was improper, but remanded the case for the Secretary to decide again, this time without relying on the 2004 Final Rule.

While the D.C. Circuit’s ruling nominally favored the hospital plaintiffs, it also effectively invited HHS to reach the same policy announced in the 2004 Final Rule, but this time through an administrative adjudication rather than a rulemaking. This is a troubling possibility for providers because adjudicatory findings, unlike most rulemakings, can be retroactively applied to previous cost years. In short, the D.C. Circuit’s Allina opinion is unlikely to be the last word on the Part C/Part A issue in particular, or on the fate of the many other pending DSH issue appeals in general.

CMS Seeks Public Comment on its Imposition of CMPs for Noncompliance with Medicare Secondary Payer Reporting Requirements; Opportunity for Clinical Trial Sponsors to Request Discretion

This post was written by Celeste Letourneau, Catherine Hurley and Jennifer Pike

The application of the Medicare Secondary Payer (MSP) law to clinical trial sponsors has long been a point of significant contention between sponsors and CMS, with CMS insisting (via subregulatory guidance, and a widely circulated letter) that clinical trial sponsors are like insurers, and thus subject to the law. In a positive development, however, Congress has now directed CMS to promulgate regulations addressing the circumstances under which CMS will exercise discretion not to impose civil monetary penalties (CMPs) for noncompliance with MSP insurer reporting requirements. This affords sponsors an important new opportunity to engage with CMS on this issue, and to request appropriate enforcement discretion.

On December 11, 2013, CMS released an advance notice of proposed rulemaking (ANPRM) soliciting comments on specific practices for which CMPs may or may not be imposed for failure to comply with MSP reporting requirements. Among other issues, CMS is seeking comments and proposals on mechanisms and criteria that it would employ to evaluate whether and when it would impose CMPs for noncompliance with MSP reporting requirements.

Although clinical trial sponsors are not mentioned in the ANPRM, CMS has expressly stated elsewhere that the MSP reporting requirements do apply to clinical trial sponsors.1 Specifically, CMS has taken the following position on clinical trial sponsors under the MSP reporting statute:

When payments are made by sponsors of clinical trials for complications or injuries arising out of the trials, such payments are considered to be payments by liability insurance (including self-insurance) and must be reported. The appropriate Responsible Reporting Entity (RRE) should report the date that the injury/ complication first arose as the Date of Incident (DOI). The situation should also be reported as one involving Ongoing Responsibility for Medicals (ORM).2

In sum, CMS views clinical trial sponsors, by virtue of any promise to pay for complications or injuries, as insurance companies, and subjects clinical trial sponsors to the same reporting obligations that liability insurers must meet. Failure to comply with the MSP reporting requirements can carry a CMP of $1,000 for each day of noncompliance, per individual, that should have been reported.3 Congress amended the MSP statute last year to afford CMS discretion with regard to whether to impose CMPs in instances of noncompliance.4 Prior to that, CMS had no such discretion. The purpose of the ANPRM is to solicit input for the circumstances under which CMS should exercise this discretion.

Clinical trial sponsors should consider whether they are prepared to comply with the MSP reporting requirements and face potential CMPs for failure to do so, or whether CMS should be urged not to impose CMPs on clinical trial sponsors. For example, clinical trial sponsors should consider whether they are prepared to:

  • Report to CMS all complications and injuries involving Medicare beneficiaries arising out of a clinical trial that they have agreed to pay for. This includes everything the sponsor has agreed to pay for; it is not limited to adverse events. For example, this could involve medications included in the study protocol and paid for by the sponsor that are intended to prevent or mitigate an anticipated adverse event.
  • For Medicare beneficiaries, collect and produce all of the data CMS requires to be reported, including identifiable information (such as patient name, social security number, date of birth, dates of incident, etc.), and all relevant ICD-9-CM/ICD-10-CM (International Classification of Diseases, Ninth/Tenth Revision, Clinical Modification) Diagnosis Codes describing the alleged injury/illness.
  • Potentially forgo Medicare reimbursement for routine costs associated with clinical trials, even though there is a national coverage determination (NCD) stating that CMS will pay.
  • Manage study subjects who are Medicare beneficiaries and who may be aggrieved because, as a result of the sponsor reporting their ICD-9-CM/ICD-10-CM codes to CMS pursuant to MSP, all their Medicare claims associated with those codes could be routinely denied during their participation in the study. 
  • Unblind clinical trials if necessary in order to satisfy reporting requirements.
  • Incur significantly increased administrative and financial costs to ensure compliance with MSP reporting. 
  • Incur the burden of complying with MSP reporting as both a clinical trial sponsor, and as a potential defendant in a product liability suit, if and when the investigational product is commercialized. This may include implementing complex and detailed processes in both the research and development, or the medical side of a company (for clinical trial sponsor reporting), and the legal department (for products liability reporting). Additionally, the former may be trial-specific, meaning that different internal processes for addressing MSP reporting may be needed for different trials. 
  • Refrain from offering to pay for research-related injuries in order to avoid triggering the MSP reporting requirements, even though this would likely result in the loss of Medicare beneficiaries as study subjects.
  • Pay a CMP of up to $1,000 per beneficiary per day for noncompliance.

The ANPRM presents the opportunity to explain to CMS that, because of the many complexities associated with imposing the MSP reporting requirements on clinical trial sponsors, CMS should not impose CMPs on clinical trial sponsors for failures to report.

The ANPRM is available at http://www.gpo.gov/fdsys/pkg/FR-2013-12-11/pdf/2013-29473.pdf. Comments to the ANPRM may be submitted in writing, or electronically at www.regulations.gov, on or before February 10, 2014.

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1See CMS’ Office of Financial Management, Financial Services Group Director (Gerald Walters) to Holly Thames Lutz, Esq. of Gardner, Carton & Douglas, dated April 13, 2004.
2See CMS, MMSEA section 111 Medicare Secondary Payer Mandatory Reporting, Liability Insurance (Including Self-Insurance), No-Fault Insurance, and Workers’ Compensation USER GUIDE, Chapter III: POLICY GUIDANCE, Version 3.4 at 40 (July 3, 2012), available at http://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Mandatory-Insurer-Reporting-For-Non-Group-Health-Plans/Downloads/New-Downloads/NGHPUserGuideVer40Ch3Policy.pdf.
342 U.S.C. § 1395y(b) (Social Security Act § 1862(b)).
4Medicare IVIG Access and Strengthening Medicare and Repaying Taxpayers Act of 2012 [Public Law No: 112-242].

CMS Releases List of Teaching Hospitals; Educational Efforts and Requests for Additional Clarification Regarding the Physician Payment Sunshine Final Rule Continue

This post was written by Elizabeth Carder-Thompson, Katie C. Pawlitz and Nancy E. Bonifant.

In preparation for data collection to begin under the Physician Payment Sunshine Act Final Rule on August 1, 2013, the Centers for Medicare & Medicaid Services (CMS) released yesterday the list of teaching hospital covered recipients to which payments and other transfers of value must be reported by applicable drug and device manufacturers.  The list, which will be updated annually by CMS at least 90-days before the beginning of a reporting year, can be found on CMS’ National Physician Payment Transparency Program: OPEN PAYMENTS website and includes approximately 1,100 legal business names that are organized by state and tax identification number.

CMS also announced this week that it will be holding a National Provider Call on Wednesday, May 22, 2013 at 2:30 PM EST, directed at physicians and teaching hospitals.  The agenda for the call includes an overview of the Final Rule, key dates, the role of covered recipients and resources available to covered recipients.

Meanwhile, stakeholders and their representatives, including the American Medical Association (AMA) and the Advanced Medical Technology Association (AdvaMed), have continued to seek additional clarification from CMS on a variety of outstanding questions.  These questions include whether journal reprints provided by a manufacturer to a physician or teaching hospital have a discernible economic value that triggers reporting requirements, what constitutes a payment or transfer of value to a teaching hospital as opposed to payments or transfers of value to an employee of the teaching hospital, and more.  Ideally, CMS will issue further guidance on these issues in sufficient time for applicable manufacturers to prepare for the data collection deadline this summer.

Part B Inpatient Billing in Hospitals

This post was written by Daniel A. Cody, Rachel M. Golick and Susan A. Edwards.

On March 13, 2013, the Centers for Medicare & Medicaid Services (CMS) concurrently issued CMS Ruling Number CMS-1455-R (the Administrator’s Ruling) and a proposed rule, “Part B Inpatient Billing in Hospitals” (the Proposed Rule). The Administrator’s Ruling and Proposed Rule address the submission of Medicare Part B inpatient claims where a Medicare Part A claim for a hospital inpatient admission is denied by a Medicare review contractor on the grounds that the inpatient admission was not “reasonable and necessary.” The Proposed Rule also would apply to situations where a hospital determined, through a self-audit, that an inpatient admission was not “reasonable and necessary.” The Administrator’s Ruling, effective as of the issuance date, establishes an interim policy to handle payment for Medicare Part B inpatient claims until CMS finalizes the Proposed Rule. The Proposed Rule would set forth a permanent regulatory scheme to permit hospitals to rebill Medicare for a wider range of Part B services than is currently permitted following denial of a Part A claim.

The impact and utility of the Proposed Rule is substantially diminished by the timeframe in which providers are allowed to resubmit Part B claims – one year after the date of service. In many cases, providers do not receive denials of Part A claims within one year of the date of service. Consequently, the one year deadline would restrict some providers wanting to resubmit Part B claims from taking advantage of the more permissive Part B resubmission framework contemplated by the Proposed Rule. In addition, pursuant to the Proposed Rule, hospitals would be able to either: (1) appeal the denied Part A claim; or (2) resubmit Part B claims. Because a hospital’s resubmission of Part B claims would bar a Part A appeal, the Proposed Rule may deter hospitals, eager for a successful Part A appeal, from resubmitting Part B claims.

Reed Smith’s Client Memo provides background and analysis of the Administrator’s Ruling and the Proposed Rule as well as a summary of potential implications for hospitals.

Click here to read the full alert.

Seeing the Light With the Physician Payment Sunshine Act

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On February 1, 2013, the Centers for Medicare & Medicaid Services released the long-awaited final rule implementing the physician payment transparency provisions, commonly referred to as the Physician Payment Sunshine Act, in the Obama administration's 2010 health care reform legislation. The Sunshine Act joins the list of significant federal laws addressing potential conflicts of interest in health care, including the Anti-Kickback Statute and the Stark Law. With implementation of the Sunshine Act now in sight, stakeholders face the real challenge of complying with, and practicing under the shadow of, the Sunshine Act and its complex and detailed regulations.

To read the full article "Seeing the Light With the Physician Payment Sunshine Act," please visit law.com.

Sunshine Physician Payment Final Rule Overview and Analysis

This post was written by Elizabeth B. Carder-Thompson, Katie C. Pawlitz and Nancy E. Bonifant.

On February 1, 2013, the Centers for Medicare & Medicaid Services (CMS) of the Department of Health and Human Services (HHS) released the long-awaited Final Rule to implement the “Sunshine” provisions of the Affordable Care Act of 2010 (ACA). The Sunshine provisions - intended to provide increased transparency on the scope and nature of financial and other relationships among manufacturers, physicians, and teaching hospitals - require that certain manufacturers of drugs, devices, biologicals, and medical supplies covered by Medicare, Medicaid and CHIP report annually to HHS identified payments or transfers of value they have made to physicians and teaching hospitals. In addition, they require manufacturers and certain group purchasing organizations (GPOs) to report to HHS information on physician ownership and investment interests.

The Final Rule provides needed clarity on some troubling aspects of the proposal, however, it leaves a number of questions unanswered. Please click here to read our detailed analysis of the Sunshine provisions, including an overview and summary of the Rule as well as discussion of the important issues that stakeholders should be considering as they prepare for Sunshine implementation.

New Development Regarding MSP Private Enforcement Provision

This post was written by Eric Buhr, Catherine Hurley and Michael Mandell.

A recent case out of a district court in Michigan suggests medical providers may have a new method to obtain payment for bills that were denied by an insurance company – Medicare Secondary Payer Act’s (MSP) private enforcement provision. Mich. Spine & Brain Surgeons, PLLC v. State Farm Mut. Auto. Ins. Co., No. 12cv11329, 2013 U.S. Dist. LEXIS 17721, *1 (E.D. Mich. Feb. 11, 2013).

In Michigan Spine, an insured covered by Medicare and State Farm automobile insurance was involved in a severe car accident. Id. at *2. Following the accident, the insured underwent extensive neurosurgery performed by Michigan Spine and Brain Surgeons, PLLC ("Michigan Spine"). Id. at *5. Michigan Spine submitted its charges to State Farm, but Sate Farm refused to cover the individual claiming that her injuries were from preexisting conditions and unrelated to the car accident. Id. at *5-*6. The insured then submitted her claim to Medicare which made a partial payment to Michigan Spine. Id. at *6.

Michigan Spine then sued State Farm under the MSPA’s private enforcement provision, 42 U.S.C. Section 1395y(b)(3)(A), which allows private actions, on Medicare’s behalf, for reimbursement from primary payers who wrongfully denied coverage. Id. at *6-*7. State Farm argued that Michigan Spine had no standing to sue under the provision because the claim had not yet "materialized" – i.e. no court had determined State Farm was liable for the insured’s medical treatment. Id. at *10.

The district court found otherwise. The court, reiterating a previously determined ruling by the Sixth Circuit, held that the showing of "materialization" or "demonstrated responsibility" only applies to a "lawsuit brought by Medicare for reimbursement for medical expenses caused by tortfeasors." Id. at *15 (quoting Bio-Medical Applications of Tenn., Inc. v. Cent. States Southeast & Southwest Areas Health & Welfare Fund, 656 F.3d 277, 279 (6th Cir. 2011)). In contrast, "a healthcare provider need not previously demonstrate a private insurer’s responsibility to pay before bringing a lawsuit under the Act’s private cause of action." Id. at *15 (quoting Bio-Medical, 656 F.3d at 279)). Thus, the district court denied State Farm’s motion to dismiss.

While Michigan Spine may relax the requirements for MSP private causes of action against primary insurance providers, the holding does not apply in the context of medical device and drug manufactures (even if self-insured); rather, that avenue remains restricted to a showing of "demonstrated responsibility."

New Law Spells MSP Relief For Private Sector

This post was written by Catherine A. Hurley and Jouya Rastegar.

There seems to be growing awareness that engaging in a “business, trade, or profession,” can easily subject any person or entity to what is known as the Medicare secondary payer ("MSP") law—a series of provisions in Title XVIII of the Social Security Act, governing the hierarchy of who pays first among applicable insurers. Given its scope and complexity, understanding and complying with the MSP law can be overwhelming. Further, although failure to comply carries obvious risk, conforming to what the law requires may also trigger certain risks of its own.

Amid consensus that the existing situation demands improvement, Congress recently passed the Medicare IVIG Access and Strengthening Medicare and Repaying Taxpayers Act of 2012, commonly referred to as the SMART Act provisions—new legislation signed January 10, 2013 that addresses at least of few of the acute challenges presented under the existing MSP system.  

Although it does not change the basic premise that a promise to pay an injured beneficiary is tantamount to a plan of liability insurance that is primary to Medicare, or generally relieve parties from their reporting obligations under section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA), the Act should give parties that make payments to Medicare beneficiaries at least some opportunity to control the process and the outcome, and alleviate some of the more draconian qualities of the current system.

Among other things, the Act:

  • Requires the agency to make up-to-date conditional payment information available on a website;
  • Requires the agency to provide a process for parties to liability settlements to dispute Medicare’s alleged MSP refund amount;
  • Ensures greater certainty to settling parties, before the settlement, with respect to the total amount Medicare is owed;
  • Requires the agency to establish an appeals process for plans to challenge MSP collections actions;
  • Requires the agency to establish minimum dollar thresholds in certain circumstances, below which refunds to Medicare are not required and payments need not be reported;
  • Requires the agency to establish safe harbors to the MMSEA section 111 reporting obligations for liability insurance and similar types of primary payers;
  • Makes civil money penalties (CMPs) for failure to comply with MMSEA section 111 reporting obligations discretionary rather than mandatory;   
  • Alleviates the existing burden to collect and report beneficiary social security numbers or health insurance claim (HIC) numbers as part of the MMSEA section 111 reporting process; and
  • Establishes a three-year statute of limitations for commencing an action against any type of primary payer to recover conditional payments and/or double damages.

Reed Smith's full analysis of the SMART Act is available here.

A SMART Change for Tort Defendants?

This post was written by Michael Mandell and Eric J. Buhr.

President Obama recently signed the Medicare IVIG Access and Strengthening Medicare and Repaying Taxpayers Act (commonly referred to as the SMART Act) to alleviate some of the confusion surrounding the Medicare Secondary Payer Act (MSP), which allows Medicare to seek reimbursement, and potential penalties, from “responsible” parties. These “responsible” parties include tort defendants, such as drug and medical device manufacturers, who become primary payers once they settle or have a judgment awarded against them in a case involving a Medicare beneficiary. The SMART Act will, among other things, introduce a three-year statute of limitations for which the government may bring an action for reimbursement and create a minimum settlement/judgment threshold below which the government will not seek reimbursement.

One of the most significant aspects of the SMART Act is that it creates a new process for obtaining final Medicare lien demands, which is meant to give some closure to defendants and plaintiffs by providing them with Medicare’s final lien amount prior to settlement. Under current practice, Medicare only issues a final lien demand after there is a settlement, judgment, award or other payment resolving the Medicare beneficiary’s liability claim against a tortfeasor. This leaves parties uncertain over what Medicare’s piece of the settlement will be and in turn hinders the settlement process. Under the SMART Act, Medicare must now create a website where the claimant or applicable plan can obtain Medicare’s “final conditional reimbursement amount” prior to settlement. Armed with this information, parties will be able to make more informed settlement decisions.

Although the Act will remove some of the ambiguity surrounding Medicare’s lien demands, the multistep process for acquiring Medicare’s final lien amount may prove too rigid. To satisfy the requirements for a finalized lien demand, individuals must pay careful attention to the SMART Act’s numerous deadlines.

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In-House Relator? The 2nd Circuit Considers Whether To Put the False Claims Act Between Attorneys and Their Clients

This post was written by Matthew R. Sheldon and Alexander Y. Thomas.

The Second Circuit Court of Appeals is reviewing a lower court decision disqualifying a former in-house attorney from acting as a False Claims Act qui tam relator against his former employer. The relator was formerly general counsel to Unilab, a subsidiary of Quest Diagnostics Inc. The qui tam suit alleged that Unilab violated the Federal Health Care Anti-Kickback Act by engaging in a fraudulent scheme to increase medical testing referrals under the Medicare and Medicaid programs. To read the full post on Reed Smith's Global Regulatory Enforcement Law Blog, click here.

 

MMSEA Section 111 Mandatory Insurer Reporting Updates

This post was written by Catherine A. Hurley.

The Centers for Medicare & Medicaid Services (CMS) has recently updated the information on its website with respect to the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA), Section 111 “Mandatory Insurer Reporting” requirements. The recent updates cover (1) a revised implementation timeline for certain liability insurance (including self-insurance) total payment obligation to claimant settlements, (2) revised guidance on claims involving exposure, ingestion, and implantation issues, (3) upcoming improvements to the Medicare Secondary Payer (MSP) program, (4) a new exception for certain settlements paid into a qualified settlement fund and (5) a new way for certain injured Medicare beneficiaries to satisfy their past and future MSP obligations.

Revised Implementation Dates

First, CMS has delayed Section 111 reporting for certain liability insurance (including self-insurance) total payment obligation to claimant (TPOC) settlements, judgments, awards, or other payments. The revised implementation date for reporting will be based on the TPOC amount. A schedule of the new dates is provided here.

Exposure, Ingestion, and Implantation – Revised Guidance

Second, CMS has posted revised guidance pertaining to liability insurance (including self-insurance) responsible reporting entities (RREs) where the claims involve exposure, ingestion, and implantation issues. In the guidance, CMS explains its policies for claims involving exposure, ingestion, and implantation. Specifically, CMS discusses when Medicare will, and will not, assert a recovery claim against the settlement, judgment, award, or other payment, and when the MMSEA, Section 111 mandatory reporting rules must (or need not) be followed. CMS also provides examples of various factual scenarios involving exposure, ingestion, and implantation, and discusses how its policies will be applied to each. 

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Prospects Unclear for CMS/FDA Proposed Parallel Review of Medical Products

This post was written by Susan A. Edwards, Elizabeth B. Carder-Thompson, Gail L. Daubert and Celeste A. Letourneau.

Notably absent from last month’s Department of Health and Human Services Semiannual Regulatory Agenda was any indication of where the Centers for Medicare and Medicaid Services ("CMS") and the Food and Drug Administration ("FDA") stand with respect to their notice with request for comments, issued last fall, on the proposed parallel review process for medical products. While CMS and FDA officials confirmed that they are currently reviewing comments submitted during the review period, they declined to speculate on when they intend to act. The comments submitted, however, provide insight into industry views on this important issue, including widespread discontent with the approval mechanisms currently available. We have undertaken a review of all of the comments submitted and extracted the eight main concerns cited in the following analysis.

CMS Awards "Survey Of Retail Prices" Contract To Myers and Stauffer - Moves One Step Closer To Average Acquisition Cost

On July 8, 2011, Centers for Medicare & Medicaid Services (CMS) announced that it had awarded Myers and Stauffer, LC a contract to prepare a monthly survey of retail community pharmacy ("RCP") prescription drug prices. The contract is in furtherance of CMS’s commitment to develop and publish “Average Acquisition Cost” ("AAC") data reflecting RCPs’ purchase costs for all covered outpatient drugs, for potential use by State Medicaid agencies in rate-setting. The details regarding how AAC will be collected, calculated and reported could be significant for pharmacies, manufacturers and other industry participants. 

To learn more about this development regarding AAC, please see the full post written by Bob Hill, Joe Metro, Dan Cody, Vicky Gormanly on Reed Smith's Health Industry Washington Watch.
 

CMS' Oversight of Security Rule "Not Sufficient" According to the OIG

This post was written by Gina M. Cavalier, Vicky G. Gormanly and Brad M. Rostolsky.

On May 16, 2011, the Office of Inspector General (“OIG”) published a report with the results from its nationwide review of the Centers for Medicare and Medicaid Services (“CMS’”) oversight of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). In its review, the OIG sought to determine the sufficiency of CMS’ oversight and enforcement actions pertaining to hospitals’ implementation of the HIPAA Security Rule. Pursuant to the Security Rule, covered entities, such as hospitals, must implement technical, physical, and administrative safeguards for the protection of electronic protected health information (“ePHI”). According to the OIG, CMS’ oversight and enforcement actions were “not sufficient,” leaving limited assurance of the security of hospitals’ ePHI.

The report details the results from the OIG’s audits of seven hospitals. The audits disclosed “numerous internal control weaknesses.” Specifically, the OIG identified 151 vulnerabilities in the systems and controls intended to protect ePHI. Of these vulnerabilities, 124 were categorized as “high impact.” These vulnerabilities placed the confidentiality, integrity, and availability of ePHI at risk. The consequences of the high impact vulnerabilities is that it (1) may result in the highly costly loss of major tangible assets or resources; (2) may significantly violate, harm, or impede an organization’s mission, reputation, or interest; or (3) may result in human death or serious injury. 

New Jersey Seeks General Assistance Rebate Payments From Non-Participating Pharmaceutical Manufacturers

This post was written by Joseph W. Metro and  David E. Dopf .

The New Jersey Department of Human Services (“Department”) has sent letters to numerous pharmaceutical manufacturers demanding rebate payments under the Work First New Jersey General Public Assistance/Medicare Part D Wraparound Drug Rebate Program (“GA Rebate Program”). The Department is seeking to collect payments from manufacturers that have chosen not to participate in the GA Rebate Program and thus never entered into a GA Rebate Program agreement with the Department (“Rebate Agreement”). In addition, for some manufacturers that have entered into Rebate Agreements, the Department is now seeking payments for time periods prior to the effective dates of those Rebate Agreements.

The Department’s demand letters have uniformly provided the manufacturers with the option of requesting, within twenty (20) days from their receipt of the letter, either a pre-hearing conference for purposes of trying to resolve the payment dispute or a formal hearing before the New Jersey Office of Administrative Law (“OAL”). Manufacturers choosing to pursue a pre-hearing conference can still request a hearing before the OAL within twenty (20) days from the date of the pre-hearing conference if the dispute is not resolved.

We believe there are very strong arguments in support of the position that a manufacturer cannot be liable for payments under the GA Rebate Program in the absence of a Rebate Agreement covering the time period for which the payments relate. Please contact Joe Metro or David Dopf if you have any questions regarding the Department’s actions or would like assistance challenging the Department’s demand for payment.
 

Medicare Secondary Payer (MSP) Mandatory Insurer Reporting: MMSEA section 111--Delay Announced for Liability Insurance (Including Self Insurance) Mandatory Reporters

This post was written by Carol C. Loepere and Catherine A. Hurley.

In an “Alert” dated November 9, 2010, the Centers for Medicare and Medicaid Services (CMS) has published a revised implementation timeline applicable to liability insurance (including self-insurance) “responsible reporting entities” (RREs) under Section 111 of the Medicare, Medicaid and SCHIP Extension Action of 2007 (MMSEA). Specifically, the obligation to report “total payment obligation to claimant” (TPOC) amounts subject to the reporting requirement has been extended from the first calendar quarter of 2011 to the first calendar quarter of 2012. Moreover, under the revised implementation timeline, only TPOC amounts established on or after October 1, 2011 (instead of October 1, 2010) must be reported. Earlier reporting (i.e., reporting prior to the first calendar quarter of 2012), and reporting of TPOC amounts established prior to October 1, 2011 is now optional. CMS has also delayed the staggered phase-out of its interim threshold dollar amounts for TPOC amounts that liability insurance (including self-insurance) and workers’ compensation RREs must report by one year. 

Mandatory reporting of ongoing responsibility for medicals (ORM) by liability insurance (including self-insurance) RREs has not been delayed. Similarly, mandatory reporting by other types of RREs (such as group health plans, no-fault insurance, and workers’ compensation) has not been delayed. Finally, this implementation delay does not affect liability insurance (including self insurance) RREs’ status as “primary payers” under section 1862(b) of the Social Security Act.

According to CMS, this Alert will be incorporated into a forthcoming revision to CMS’s MMSEA Section 111 Medicare Secondary Payer Mandatory Reporting “User Guide” for Liability Insurance (Including Self-Insurance), No-Fault Insurance, and Workers’ Compensation. 

Stark Law Developments Will Challenge Health Care Attorneys

Despite the many years since enactment, counseling health care clients on the broad and complex federal physician self-referral law, commonly called the Stark Law, will become increasingly difficult. Although originally enacted in 1989 to create "bright line" to demark improper physician self-referred laboratory services, and expanded in 1993 to cover a wide range of "designated health services" reimbursable under Medicare, the contours of the Stark Law continue to evolve and new uncertainties emerge.

The significant damages that can result from a Stark Law violation — most particularly the prospect under the False Claims Act for recovery of three times the Medicare reimbursement paid as a result of a prohibited referral — has caused the Stark Law to attract increasing attention from U.S. Attorneys offices and the private qui tam relator bar.

In his article "Stark Law Developments Will Challenge Health Care Attorneys," published in The Legal Intelligencer, Reed Smith Partner Karl Thallner discusses recent developments demonstrating the difficulties in counseling health care clients on the application of the Stark Law, as well as with selecting a course of action when a Stark Law violation has been discovered.

CMS Proposes Broad Expansion of Medicare/Medicaid/CHIP Provider and Supplier Screening Requirements Under Affordable Care Act Authority

This post was written by Daniel A. Cody, Scot T. Hasselman, Carol C. Loepere and Debra A. McCurdy.

On September 23, 2010, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule that would implement provisions of the Affordable Care Act (ACA) designed to strengthen provider and supplier screening requirements under the Medicare, Medicaid, and Children’s Health Insurance Program (CHIP). According to CMS, the Proposed Rule is intended to ensure "that only legitimate providers and suppliers are enrolled in Medicare, Medicaid, and CHIP, and that only legitimate claims will be paid."

Among many other things, the Proposed Rule would: apply screening tools, including unannounced site visits, background checks, and fingerprinting, based on the level of risk associated with different provider and supplier types; impose a $500 application fee on certain providers and suppliers; authorize temporary moratoria on enrollment of certain types of new providers and suppliers; require Medicare and Medicaid payments to be suspended upon credible allegations of fraud; and update various Medicaid screening requirements. Comments on the proposed rule will be accepted until November 16, 2010.

Our full alert provides an analysis of the proposed rule.

Office of Pharmacy Affairs Publishes Final Notice Allowing Covered Entities to Use Multiple Contract Pharmacies

This post was written by Elizabeth O’Brien and Joseph W. Metro.

On March 5, 2010, the Office of Pharmacy Affairs published a Final Notice allowing covered entities to use multiple contract pharmacies in order to supplement “in-house” pharmacy services or to increase patient access to 340B drugs. This Final Notice replaces “Notice Regarding Section 602 of the Veterans Health Care Act of 1992; Contract Pharmacy Services (61 Fed. Reg. 43,549) and all other previous 340B Program guidance regarding non-network contract pharmacy services.

Under the Public Health Service Act’s Section 340B drug pricing program, manufacturers who sell covered outpatient drugs to specific federal grantees, federally-qualified health center look-alikes and qualified disproportionate share hospitals (“covered entities”) must agree to charge less than the statutorily-prescribed maximum price for those drugs, which results in significant savings on drugs for the covered entities. Previously, the Health Resources and Services Administration ("HRSA") Office of Pharmacy Affairs had specified procedures under which discounts could be made available to covered entities engaging a single contract pharmacy, and had conducted an Alternative Methods Demonstration Project program in which HRSA approved a limited number of covered entities using multiple contract pharmacies.

Effective April 5, 2010, the Final Notice permits all covered entities to use multiple contract pharmacies. The guidelines in the Final Notice give covered entities and contract pharmacies a great deal of freedom in structuring their contract pharmacy services agreements, so long as they implement and maintain mechanisms to ensure compliance with 340B Program rules, especially against diversion of drugs. To learn more about the Final Notice, including compliance guidelines, potential alternatives to the single location/single pharmacy model and suggested contract provisions, read the full alert

CMS Clarifies Telemarketing Rules for DME Suppliers

This post was written by Elizabeth B. Carder-Thompson and Debra A. McCurdy.

The Centers for Medicare & Medicaid Services (CMS) has issued new "Telemarketing FAQs" to supplement the Office of Inspector General's (OIG) recent revisions to its Special Fraud Alert on Telemarketing by Durable Medical Equipment Suppliers. As you may recall, in January 2010, the OIG amended the Special Fraud Alert to add a warning about suppliers contacting a beneficiary before the supplier receives written beneficiary consent, as it may violate the statutory provision that prohibits Durable Medical Equipment (DME) suppliers from making unsolicited telephone calls to Medicare beneficiaries regarding the furnishing of a Medicare-covered item. Specifically, the OIG stated 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."

In response to this new language, Reed Smith contacted the OIG to discuss the adverse impact this policy would have on timely beneficiary access to medically necessary equipment ordered by a physician, since some suppliers call a beneficiary to arrange for equipment deliveries upon receiving an initial physician verbal order. The OIG has just sent us a copy of new CMS Telemarketing FAQs that seek to clarify certain aspects of the revised Special Fraud Alert. Notably, CMS clarifies that there are circumstances in which a supplier may contact a beneficiary based on receipt of a physicians' order if the physician contacts the supplier with the beneficiary's knowledge:

Question 3: Is a supplier contacting the beneficiary based on the receipt of a physician order considered an “unsolicited” contact?

Answer 3: If a physician contacts a supplier on behalf of a beneficiary with the beneficiary’s knowledge, and then a supplier contacts the beneficiary to confirm or gather information needed to provide that particular covered item (including delivery and billing information), then that contact would not be considered “unsolicited.” Please note that the beneficiary need only be aware that a supplier will be contacting him/her regarding the prescribed covered item, recognizing that the appropriate supplier may not have been identified at the time of consultation.

On the other hand, if the beneficiary is not aware that the physician would be contacting the supplier on the beneficiary's behalf, the contact may be prohibited.

Question 4: What if a supplier contacts the beneficiary based solely on the physician order (and therefore the contact is without the beneficiary’s knowledge that the physician would be contacting a supplier on the beneficiary’s behalf)?

Answer 4: Then that contact would be considered “unsolicited” and, depending on the facts and circumstances of the particular case, may be prohibited.

Notes on the National Summit on Health Care Fraud

This post was written by Elizabeth Carder-Thompson.

Last week, in my capacity as president of the American Health Lawyers Association, I attended the first National Summit on Health Care Fraud, a joint undertaking by the U.S. Department of Health and Human Services and the U.S. Department of Justice. The conference brought together private sector leaders, law enforcement personnel, and health care experts as part of the Obama Administration’s coordinated effort to fight health care fraud. This was the first national gathering on health care fraud between law enforcement and the private and public sectors.

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CMS Prepares to Re-Launch Medicare DMEPOS Competitive Bidding -- Tips for Potential Bidders

CMS is preparing to re-launch its controversial competitive bidding program for Medicare suppliers of certain types of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). Under competitive bidding, only suppliers who are successful bidders will be eligible to furnish certain categories of DMEPOS to Medicare beneficiaries in certain geographic areas (with very limited exception). Under competitive bidding, successful bidders will be paid based on the median of the winning suppliers’ bids for each of the selected items in the region, rather than the Medicare fee schedule or supplier bid amount. This will be CMS’s second attempt to institute DMEPOS competitive bidding, after the first round of bidding was blocked by Congress last year because of widespread concerns about how the program was implemented. Reed Smith’s Life Sciences Health Industry Alert, “CMS Prepares to Re-Launch Medicare DMEPOS Competitive Bidding—Tips for Potential Bidders,” highlights seven steps suppliers can take now to prepare for the coming bidding period based on the lessons learned during the first round of bidding.

IRS Final Hospital Study and its Implications for Tax Reporting

This post was written by Carolyn D. Duronio and Kristen M. Gurdin.

On February 12, 2009, the Internal Revenue Service (the “Service”) released its long–awaited Hospital Compliance Project Final Report (the “Report”). The Service commenced the Hospital Compliance Project in 2006 by sending out comprehensive questionnaires to 544 tax-exempt hospitals. The questionnaires focused primarily on hospitals’ current practices with respect to community benefits and executive compensation. The Report details the data the Service compiled from the 487 respondent hospitals and the 20 hospitals selected for examination from that group. The Report did not provide any conclusions on whether the federal tax rules regarding community benefits and executive compensation should be changed. IRS officials’ and lawmakers’ initial interpretation of the Report and its findings, however, suggests that exempt hospitals should expect significant scrutiny of the community benefit and compensation information that they provide on the revised IRS Form 990 and that stricter requirements may be forthcoming.

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

TRICARE Retail Pharmacy Program Subject To Federal Ceiling Prices Under New DoD Rule

This post was written by Joseph W. Metro and Lorraine Mullings Campos.

On March 17, 2009, the Department of Defense (DoD) issued a final rule to implement a provision of the 2008 National Defense Authorization Act (NDAA). In the final rule, the DoD takes the position that the NDAA requires pharmaceutical manufacturers to provide discounted drug prices based on the Veterans Health Care Act’s (VHCA’s) Federal Ceiling Price (FCP), for covered drugs sold by retail pharmacies to TRICARE beneficiaries on or after Jan. 28, 2008 (the date of enactment of the NDAA). DoD further establishes a process whereby manufacturers’ satisfaction of this obligation will be a condition to a product’s continued Tier 2 status on the TRICARE uniform formulary. Finally, however, DoD indicates that it will consider, pursuant to its authority under the Federal Debt Collection Act, proposals to settle outstanding "refund" claims for periods prior to the effective date of the rule.

Further discussion and commentary by the authors is included after the jump. For additional background information, please see Reed Smith’s full alert.

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Health Information Privacy and Incentives, Medicaid Funding, and Other Health Care Provisions in the American Recovery and Reinvestment Act

This post was written by Karl A. Thallner, Jr., Carol C. Loepere, Debra A. McCurdy, Brad M. Rostolsky, Jacqueline B. Penrod, and Amie E. Schaadt.

On February 17, 2009, President Obama signed into law H.R. 1, the American Recovery and Reinvestment Act (the “ARRA”). The sweeping $790 billion economic stimulus package includes a number of health care policy provisions. Reed Smith's Health Care Memorandum summarizes the major health policy provisions of the Act.

RAC Protest Resolved: Audit Work Will Now Resume

This post was written by Jason M. Healy.

Centers for Medicare & Medicaid Services ("CMS") states that on February 4, 2009 the parties involved in the protest of the award of the Recovery Audit Contractor ("RAC") contracts settled the protests filed with the GAO.

The settlement means that the stop work order has been lifted and CMS will now continue with the implementation of the RAC program.

Under the program, the four RACs will contract with subcontractors to supplement their efforts. PRG-Schultz, Inc. will serve as a subcontractor to HDI, DCS and CGI in regions A, B and D. Viant Payment Systems, Inc. will serve as a subcontractor to Connolly Consulting in region C. Each subcontractor has negotiated different responsibilities in each region, including some claim review.

According to the CMS Notice, the RAC in each jurisdiction is as follows:

Region A: Diversified Collection Services (DCS)
Region B: CGI
Region C: Connolly Consulting, Inc.
Region D: HealthDataInsights, Inc.

All correspondence, websites and call centers will be in the name of the RACs listed above. 

Recovery Audit Contractor (RAC) Program To Resume In February 2009: What Every Medicare Provider and Supplier Should Know

This post was written by Jason M. Healy.

By now, most Medicare providers have heard about the Medicare Recovery Audit Contractor (RAC) demonstration and that it is currently being rolled out nationwide as a permanent program. On November 4, 2008, however, CMS imposed an automatic stay on the RAC program after two unsuccessful bidders for RAC contracts filed protests with the Government Accountability Office (GAO). GAO has 100 days to issue its decision, which means that all RAC program work is on hold until early February 2009.

Because the three-year demonstration program that ended in March of last year was limited to six states (New York, Florida, California, Massachusetts, South Carolina, and Arizona), it may not be obvious to all providers and suppliers that RACs pose a threat when the RAC program resumes. To understand that threat and how best to address it, it is important to understand where RACs will operate; what RAC auditors are designed to do and how they audit; where your claims fit within a RAC’s set of priorities; and your rights as a Medicare provider or supplier to challenge RAC overpayment determinations through appeal.

Read Reed Smith’s full alert, "What Every Medicare Provider and Supplier Should Know About RAC Audits and Appeals."

The "Medicare Improvements for Patients and Providers Act of 2008": Delay and Reform of the Medicare DMEPOS Competitive Bidding Program

This post was written by Debra A. McCurdy, Carol Loepere, Elizabeth Carder-Thompson, Robert J. Hill and Kathleen McGuan.

I.  INTRODUCTION

On July 15, 2008, the House and Senate overrode President Bush’s veto of H.R. 6331, the “Medicare Improvements for Patients and Providers Act of 2008” (“MIPPA”).1  Among many other things, MIPPA delays and reforms the Centers for Medicare & Medicaid Services’ (“CMS”) controversial competitive bidding program for certain categories of durable medical equipment, prosthetics, orthotics and supplies (“DMEPOS”), which had already gone into effect in 10 geographic areas on July 1, 2008. 

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Health Law Monitor

Articles in This Issue:

  • Provider Networks and Joint Ventures: Avoiding Antitrust Scrutiny Through Clinical Integration
  • Stark II, Phase III Final Rule
  • In the Spotlight:  Fraud and Abuse
  • Health Law 101:  Fraud and Abuse
  • Recent Reed Smith Publications

Click here to read the Spring 2008 issue of Health Law Monitor.

Proposed Stark Law Changes in CMS's 2009 IPPS Proposed Rule

This post was written by Karl A. Thallner, Jr., Gina M. Cavalier, and Daniel A. Cody.

I. INTRODUCTION

On April 30, 2008, the Centers for Medicare & Medicaid Services (“CMS”) published a proposed rule to implement the Fiscal Year 2009 Hospital Inpatient Prospective Payment System (the “IPPS proposed rule”). 73 Fed. Reg. 23528. The IPPS proposed rule includes possible changes to certain provisions of the federal Physician Self-Referral Law, or “Stark Law,” regulations. Under the Stark Law, if a physician or a member of a physician’s immediate family has a financial relationship with an entity, the physician may not make referrals to that entity for the furnishing of certain “designated health services” (“DHS”) under Medicare, unless an exception applies. A DHS entity is prohibited from seeking or keeping payment for services furnished as a result of a prohibited referral. The IPPS proposed rule’s changes to the Stark Law regulations come on the heels of two other significant Stark Law regulatory developments – the July 2007 proposed Stark Law changes contained in the proposed 2008 Medicare Physician Fee Schedule (“2008 proposed MPFS”) regulations and the September 2007 final Phase III Stark Law regulations1. CMS will accept comments from the public on these proposed regulations until June 13, 2008.

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Operating Notes: Developments Surrounding Outpatient Surgical Facilities Continue to Unfold in 2008

Calendar year 2008 has begun where 2007 ended, by presenting us with a number of legal developments impacting the provision of outpatient surgical care. Keeping up with such developments is a challenge for those of us whose careers revolve around representing outpatient surgical facilities. Keeping up for those who actually own and/or operate such facilities as part of their practices may simply be impossible.

Accordingly, this post details our discussion of selected recent developments in the outpatient surgery arena to be useful. This alert and others that we will forward do not purport to be exhaustive accounts of legal developments impacting ASCs or physician-owned hospitals nationally. Rather, we have identified developments that we found particularly interesting in that they address common themes or questions that we frequently encounter.

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Medicare, Medicaid, and SCHIP Extension Act of 2007 Enacted into Law

President Bush has signed into law S. 2499, the “Medicare, Medicaid, and SCHIP Extension Act of 2007." Most notably, the legislation postpones for six months a 10.1% across-the-board cut in Medicare physician payments that was scheduled to go into effect January 1, 2008.

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Expansion of Medicare DMEPOS Competitive Bidding Announced

This post was written by Debra McCurdy, Carol Loepere, and Elizabeth Carder-Thompson.

I. INTRODUCTION

On January 8, 2008, CMS announced the second phase of Medicare competitive bidding for durable medical equipment (“DME”), prosthetics, orthotics, and supplies (“DMEPOS”). In this second round, competitive bidding will be implemented in 70 areas, including the nation’s largest cities. The complete list of areas can be found at Appendix 1. With very limited exception, only suppliers who are successful bidders in these regions and who meet program standards (including accreditation) will be eligible to furnish eight categories of DMEPOS to Medicare beneficiaries beginning next year. Successful bidders will be paid based on the median of the winning suppliers’ bids for each of the selected items in the region, rather than the Medicare fee schedule or supplier bid amount.

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