Life Sciences Legal Update : Life Sciences Lawyers & Attorneys : Reed Smith Law Firm : Healthcare, Food and Drug Law, Biotechnology, Privacy, Product Liability

This post was written by Elizabeth Carder-Thompson, Joseph W. Metro, Robert J. Hill, Jennifer A. Goldstein, Kevin M. Madagan, Carol C. Loepere and Debra A. McCurdy.

In April 2010, Reed Smith provided an extensive analysis of the recently-enacted health reform legislation, H.R. 3590, the Patient Protection and Affordable Care Act (PPACA), as amended by H.R. 4872, the Health Care and Education Reconciliation Act of 2010 (Reconciliation Act). In this analysis, we concentrate on those provisions in the new law that will affect life sciences entities: pharmaceutical, device, and biologics manufacturers. To read the full alert, click here.

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This post was written by Elizabeth B. Carder-Thompson, Carol Loepere,  Joseph W. Metro, and Scot T. Hasselman.

We want to alert our manufacturer clients to the potential importance of a specific provision included in our analysis of the recent health care reform legislation. As we note at page 108 of our memorandum:

Medicaid Exclusion from Participation Relating to Certain Ownership, Control, and Management Affiliations (Sec. 6502)

[T]his provision requires Medicaid agencies to exclude individuals or entities from participating in Medicaid for a specified period of time if the entity or individual owns, controls, or manages an entity that: (1) has failed to repay overpayments during the period as determined by the Secretary; (2) is suspended, excluded, or terminated from participation in any Medicaid program; or (3) is affiliated with an individual or entity that has been suspended, excluded, or terminated from Medicaid participation.

In recent years, a number of pharmaceutical and device manufacturers that have been subject to investigation and enforcement activity by the Office of Inspector General, the Department of Justice, and/or state entities, have opted to have subsidiaries -- sometimes all but defunct ones -- plead guilty to a criminal kickback charge for which they are excluded from participation in Medicare and Medicaid under the mandatory exclusion provisions of 42 U.S.C. 1320a-7(a). The parent organization or another subsidiary then has continued to conduct business as usual, though typically subject to a Corporate Integrity Agreement.

The cited provision in the PPACA legislation could be interpreted to mean that, if a pharmaceutical manufacturer's subsidiary or affiliate takes a plea and is excluded, then state Medicaid programs must exclude the parent company from Medicaid participation. This in turn means that the parent's products will not be reimbursed by Medicaid programs -- in effect, that patients will not have access to that manufacturer's products. This is a draconian measure not previously contemplated as a mandatory matter. Further, such an action could be a predicate for Medicare exclusion as well. There remain some undefined terms in the legislation (for example, the period of exclusion), and it is unclear whether state Medicaid agencies might interpret the provision to allow them to adopt some type of "permissive exclusion" process, rather than having exclusions be automatic.

While at first blush this provision appears to be adverse to manufacturers in the sense that it authorizes additional sanctions, its practical implications in the context of global resolutions of dual track criminal-civil investigations are less clear. On the one hand, it could arguably provide even greater leverage to prosecutors than already exists. On the other hand, since the exclusion implications of a criminal kickback plea would likely be wholly unacceptable to a manufacturer, it could either act as a barrier to global resolutions or alternatively might force the parties to consider other sorts of pleas that are not subject to mandatory exclusion (e.g., pleas to FDA violations).

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This post was written by Carol C. Loepere, Erik T. Atkisson and Catherine A. Hurley.

The Medicare secondary payer (“MSP”) law requires Medicare to be the “secondary” payer of health benefits for Medicare beneficiaries where another entity is the “primary” payer of health benefits. Determining whether another entity is “primary” and when Medicare is “secondary” has often been difficult due to the wide range of circumstances in which another party may be responsible for a Medicare beneficiary’s health expenses, the number of potential parties involved, and the somewhat confusing terminology in the law itself. As a result, Congress enacted new rules to enhance the enforcement of the MSP law. Any entity that might pay settlements to Medicare-eligible plaintiffs that would cover any health expenses, or might otherwise compensate Medicare beneficiaries for health expenses as part of group health insurance, workers’ compensation, or any other arrangement or plan, needs to become familiar with these new rules. Specifically, Congress now requires such entities to (1) register as a responsible reporting entity (“RRE”), and (2) electronically report information to the Centers for Medicare & Medicaid Services (“CMS”).CMS will use this information to track and recover health expenses it incurred on behalf of Medicare beneficiaries but that another entity, as a primary payer under the existing MSP requirements, may be responsible for paying.  To read the full alert, click here.

Update:  For more information about this topic from an insurance industry perspective, please check out the Reed Smith Policyholder Perspective blog.

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On July 1, 2009, the Centers for Medicare & Medicaid Services (“CMS”) proposed to relax its controversial position concerning physician supervision of hospital outpatient services. The hospital industry had recently been vocal in its objection to CMS’s position, and the latest proposal signifies a potential important win for hospitals. If adopted, hospitals will be able to meet Medicare supervision requirements for outpatient services, without incurring some of the high costs necessary to ensure physician presence while those services are furnished. 

The July 1 proposal is contained in CMS’s hospital outpatient prospective payment system (“HOPPS”) rule for 2010. The controversy arose a year earlier in CMS’s HOPPS rule for 2009. In the 2009 HOPPS rule, CMS “clarified” that direct supervision by a physician is required for outpatient hospital therapeutic services furnished “incident to” a physician’s services – not only in an off-campus hospital-based location, but also in the main hospital building or an on-campus department. This means that a physician must be present in each provider-based department when these services are furnished. While styled as a clarification, most hospitals saw CMS’s position in the 2009 HOPPS rule as a significant change from prior CMS guidance. Specifically, in the original HOPPS regulations from 2000, while CMS required that services furnished at a location designated as a department of a provider under the Medicare “provider-based” rules must be furnished under the direct supervision of a physician, CMS also stated that it “assumed” that the direct supervision requirement would be met when the services are furnished on a hospital’s campus. 

In the latest proposal, CMS articulated three new proposed policies for physician supervision for hospital outpatient services that would go into effect Jan. 1, 2010. 

• First, nonphysician practitioners (physician assistants, nurse practitioners, clinical nurse specialists, and certified nurse-midwives) would be permitted to directly supervise all hospital outpatient therapeutic services that they may perform themselves in accordance with state law, and scope of practice, hospital-granted privileges, and other Medicare requirements. 
• Second, for outpatient services furnished in the hospital or in an on-campus outpatient department of the hospital, the “direct supervision” requirement would be met if the physician or nonphysician practitioner is present on the same campus, in the hospital or on-campus provider-based department, and is immediately available to furnish assistance and direction throughout the performance of the procedure.
• Third, for hospital outpatient diagnostic services, the physician supervision requirements attributable to each particular test under the Medicare physician fee schedule would have to be satisfied, whether the test is performed directly or under arrangements. While the same definition of “direct supervision” applicable to therapeutic services would also apply to diagnostic tests, nonphysician practitioners would not be permitted to supervise diagnostic tests.

These changes would allow hospitals significantly more flexibility in meeting the supervision requirements, and would represent a relaxation not only from CMS’s policy articulated in the 2009 HOPPS rule, but in some respects also from CMS’s policy prior to 2009. In particular, for example, nonphysician practitioners will be able to supervise therapeutic services furnished in off-campus provider-based departments.

An advance copy of the proposed 2010 HOPPS rule, which is scheduled to be published in the Federal Register July 20, 2009, is available here. Hospitals desiring to comment on the proposal must do so by Aug. 31, 2009. The final HOPPS rule is likely to be released in December 2009. Hospitals should monitor regulatory developments in this area in order to be able to adjust physician and nonphysician staffing and scheduling of services accordingly.

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

On May 20, 2009, the President signed into law the Fraud Enforcement and Recovery Act of 2009 (“FERA”), which will implement significant changes to the federal False Claims Act (“FCA”). The amendments to the FCA will significantly expand 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.

The House and Senate both passed the bill with overwhelming majorities before the President signed FERA into law. While the new law is primarily targeted at potential fraud involving recipients of economic stimulus funds in the financial services industry, it also includes some very significant changes to the liability provisions of the federal False Claims Act affecting members of the health care industry.  To read Reed Smith's full alert, please click here.

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This post was written by Elizabeth Carder-Thompson and Andrew L. Hurst.

A dizzying array of civil and criminal provisions address false or fraudulent representations made to, and false claims filed with, Medicare, Medicaid, and state and federal health care programs. This attached article, first published by the American Health Lawyers Association, briefly identifies relevant criminal and civil provisions relating to these issues, and then focuses more closely on recent uses of the civil False Claims Act (“FCA”) in government investigations of health care providers, suppliers, and manufacturers, including a section on state false claims legislation. Finally, it discusses the issue of distinguishing overpayments from false claims and provide information on the voluntary disclosure program of the Office of the Inspector General (“OIG”) of the Department of Health and Human Services (HHS).

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The Reed Smith Health Industry Washington Watch blog has been updated to discuss a variety of regulatory and legislative developments of interest to the life sciences and health industry, including the following:

• Legislative Developments: President Bush signed into law mental health parity legislation and funding for HHS and other federal agency programs through March 6, 2009. Congress also has cleared online pharmacy and organ transplant bills that now await the President's signature.
• CMS Developments: A new CMS initiative to combat Medicare DMEPOS and home health fraud and abuse; CMS guidance on Medicare payment of certain routine costs associated with clinical trials; CMS release of “Medically Unlikely Edits” used by Medicare contractors to prevent payment for excessive services; and waiver of certain hospital quality reporting requirements in hurricane areas.
• Regulatory Developments: Revised FY 2008 Medicare hospital inpatient PPS rates; solicitation of members for the DMEPOS competitive bidding advisory committee; a final rule on Medicaid self-directed personal assistance services; a final rule revising the Medicaid definition of "multiple source drug"; and FDA reporting requirements for authorized generics.
• OIG and GAO Developments: The OIG has released its FY 2009 Work Plan, supplemental compliance program guidance for nursing facilities, and reports on nursing home deficiencies. The GAO has issued reports on trends in Medicare imaging services and hospital-associated infections.
• Upcoming Events: CMS is hosting a conference on DMEPOS supplier accreditation and provider calls on adoption of the ICD-10 coding system.

For details on these and other health industry developments, please visit healthindustrywashingtonwatch.com.

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A lesser-known provision in the Medicare Program allows payment for "reasonable and necessary" items or services provided through clinical trials. At the same time, even for traditional reimbursement, the Centers for Medicare & Medicaid Services (CMS) increasingly is demanding evidence of effectiveness in the Medicare population, rather than simply in the general population, to support a coverage decision. The federal government has sought, often without much success, to increase participation by Medicare recipients in clinical trials, because Medicare recipients traditionally have been underrepresented in research populations--meaning the very evidence CMS seeks for traditional reimbursement often does not exist. Developments regarding these reimbursement policies by CMS are the subject of an informative and timely article for the FDLI UPDATE by Reed Smith attorney Kathleen McGuan.

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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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