Proposed Exclusive Arrangement Between Lab and Physician Practices May Violate Federal Law

A laboratory proposing to enter into an exclusive relationship with physician practices has been advised that the arrangement may violate federal law.  The laboratory sought advice from the Office of Inspector General (“OIG”) of the Department of Health and Human Services on an arrangement in which the laboratory would contract with physician practices to provide all laboratory services to the practices’ patients, without regard to the patients’ health insurance coverage.  The requesting laboratory would not bill those patients whose health plans — so-called “exclusive plans” — require them to use other laboratories (nor would the lab bill the practices themselves).  In its Advisory Opinion posted on March 25, 2015, the OIG concluded that the arrangement may violate the Anti-Kickback Statute and subject the laboratory to administrative sanctions, including exclusion from federal health care programs (e.g., Medicare and Medicaid).
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Amanda Hayes

Amanda Hayes

Amanda Hayes counsels clients in connection with mergers and acquisitions, divestitures and other business matters, with a particular focus on the health care industry. She regularly serves as lead counsel on acquisitions and divestitures, guiding the client through deal structuring, due diligence, drafting, negotiation and closing. In addition to health care, Ms. Hayes’ mergers and acquisition experience includes a variety of industries, such as manufacturing, retail, automotive, contract research, environmental remediation, engineering and construction supply.

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No Judicial Relief to the ALJ Waiting Game — Yet

In May 2014, the American Hospital Association filed suit against the United States Department of Health and Human Services seeking to compel Administrative Law Judges (ALJs) to comply with applicable statutory deadlines for deciding Medicare claim appeals.

By law, ALJs are required to render a decision within ninety days of a request for hearing to appeal the second-level reconsideration determination (in the case of claims appeals) and the first-level reconsideration determination (in the case of entitlement appeals).   ALJs are currently not in compliance with this requirement.  The backlog of appeals is significant.   The number of appeals made to the ALJ increased by over 500% from the 2011 fiscal year to the 2013 fiscal year, largely driven by the appeal of determinations by Recovery Audit Contractors.  The number of appeals outstanding in July 2014 was 800,000.  While both the Office of Medicare Hearings and Appeals and the Centers for Medicare and Medicaid Services have implemented a number of projects and pilot programs to try to reduce the number of appeals currently before the ALJ, many providers expect to wait years for an ALJ hearing.

In December 2014, the United States District Court for the District of Columbia determined that the delay did not warrant judicial intervention and granted a motion to dismiss the lawsuit.   In a letter published in response to the decision, the AHA announced its intent to appeal the decision.

Joy Hord

Joy Hord

Joy Hord focuses her practice on regulatory and compliance matters specifically related to the health care industry. Her clients include hospitals, physicians, pharmacies and other health care providers. Ms. Hord also has significant experience representing health care professionals and organizations with business law and transactional issues, such as mergers, acquisitions and joint ventures. Ms. Hord leads Parker Poe’s Health Care Practice, which includes attorneys from the firm’s North Carolina and South Carolina offices.

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The $10,000 Access Clause

This paragraph (or some variation) finds its way into lots of contracts when one or both of the parties to the contract are participants in the health care industry:

If [Party name] provides services, the cost or value of which is $10,000 or more over a 12-month period, including contracts for both goods and services in which the service component is worth $10,000 or more over a 12-month period, then  [Party name] allows the Comptroller General of the United States, HHS, and their duly authorized representatives access to [Party name]’s contract, books, documents, and records until the expiration of four years after the services are furnished under the terms of this Agreement.  [Party name] will also allow access to the subcontractor’s contracts of a similar nature between subcontractors and related organizations of the subcontractor, and to their books, documents, and records.

Does it need to be in the contract?  The simple rule is that, unless the contract relates to provision of services to an entity that is enrolled as a provider with Medicare (Part A), it does not need to be included.   If, however, the contract does relate to services to a provider (such as a hospital, skilled nursing facility, or hospice), then the provision must be included–or Medicare can deny reimbursement for the service.

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Joy Hord

Joy Hord

Joy Hord focuses her practice on regulatory and compliance matters specifically related to the health care industry. Her clients include hospitals, physicians, pharmacies and other health care providers. Ms. Hord also has significant experience representing health care professionals and organizations with business law and transactional issues, such as mergers, acquisitions and joint ventures. Ms. Hord leads Parker Poe’s Health Care Practice, which includes attorneys from the firm’s North Carolina and South Carolina offices.

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The Game Plan for Health Care Enforcement: Office of Inspector General Releases 2015 Work Plan

The Office of Inspector General (“OIG”) within the federal Department of Health and Human Services (“HHS”) is charged with protecting the integrity of HHS programs by combating fraud, abuse and waste.  On October 31, 2014, the OIG released its Work Plan for fiscal year 2015.  The Work Plan highlights the projects and issues that OIG intends to prioritize in 2015.

According to the Work Plan, the OIG will continue to emphasize oversight of Medicare and Medicaid payments, emerging payment models, IT systems security vulnerabilities (particularly in health insurance marketplaces), quality of care and access in Medicare and Medicaid, and public health and human services programs.  The Work Plan indicates that the OIG is also considering new work in the areas of food, drug and medical device supply chain integrity, electronic data security, health information technology and emergency preparedness and response.

Within these broad categories of focus, the Work Plan highlights many specific initiatives.  Many of these are ongoing projects, while others are new to this year’s Work Plan.

Some notable new initiatives include review of:

  • Hospital wage data used to calculate Medicare payments
  • Factors contributing to adverse and temporary harm events for Medicare beneficiaries receiving care in long-term care hospitals, determination of preventability of those events, and estimation of the costs to Medicare
  • Medicare payments to independent clinical laboratories to determine labs’ compliance with selected billing requirements, with the goal of identifying those that routinely submit improper claims and recovering overpayments
  • Medicaid beneficiary transfers from group homes and nursing facilities to hospital emergency rooms, with a particular focus on potential quality issues raised by high transfer rates
  • Managed care organization payments for services after beneficiaries’ deaths and for ineligible beneficiaries

The Work Plan also continues a number of initiatives from prior years.  These focus areas span the healthcare provider industry – including hospitals, nursing homes, physician practices and other providers, hospices, long-term care providers, home health, ambulatory surgery centers, end-stage renal disease facilities, ambulance providers and others.  The following are a few notable initiatives relevant to various industry segments:

Hospitals

  • Impact of the “two midnight” rule on inpatient and outpatient billing
  • Compliance with provider-based status criteria
  • Provider-based versus free-standing clinic payment rates
  • Reimbursement for swing-bed services at critical access hospitals, as compared to the same level of care provided at traditional skilled nursing facilities
  • Duplicate or excessive graduate medical education payments
  • Outpatient evaluation and management services billed at the new patient rate, rather than the established patient rate
  • Oversight of pharmaceutical compounding
  • Review of medical staff candidate credentialing

Nursing Homes

  • Billing for high level therapy when beneficiary characteristics remain largely unchanged
  • Questionable billing patterns for Part B services during stays not paid under Part A
  • Oversight of state agency verification of correction plans for deficiencies identified during recertification surveys
  • Hospitalization of residents for conditions manageable or preventable in the nursing home setting


Hospices

  • Review of extent of hospice services rendered to beneficiaries resident in assisted living facilities, including length of stay, levels of care and common terminal illnesses
  • Appropriateness of hospice general inpatient care

Home Health

  • Compliance with prospective payment system requirements, including documentation requirements
  • Employment of individuals with criminal convictions

Medical Equipment

  • Competitive bidding and post-award audit
  • Power Mobility Devices, including rental v. lump sum payments, medical necessity and face-to-face examination requirements
  • Lower limb prosthetic billing practices
  • Medical necessity of nebulizer machines and related drugs
  • Diabetic testing supplies, including medical necessity, frequency and other requirements

Ambulatory Surgery Centers (“ASC”)

  • Review of Medicare’s methodology for ASC payment rates
  • Review of disparity between payments to ASCs and hospital outpatient departments for similar surgical procedures

End-Stage Renal Disease Facilities

  • Medicare payments under prospective payment system

Ambulance Providers

  • Questionable billing, including medical necessity, level of transport and transports billed but not conducted
  • Analysis of Part B data to identify vulnerabilities, inefficiencies and fraud trends

Physicians and Other Providers

  • Place-of-service coding errors by physicians
  • Payments for personally performed anesthesia services (and incorrect service code modifiers)
  • Questionable billing for chiropractic services
  • Inappropriate billing by opthalmologists
  • Medical necessity of high-cost diagnostic radiology tests
  • Documentation and medical necessity of outpatient physical therapy services
  • High utilization of sleep testing procedures

The foregoing are just a few of the many initiatives outlined in the Work Plan.  Download the full Work Plan here: http://oig.hhs.gov/reports-and-publications/workplan/index.asp

Amanda Hayes

Amanda Hayes

Amanda Hayes counsels clients in connection with mergers and acquisitions, divestitures and other business matters, with a particular focus on the health care industry. She regularly serves as lead counsel on acquisitions and divestitures, guiding the client through deal structuring, due diligence, drafting, negotiation and closing. In addition to health care, Ms. Hayes’ mergers and acquisition experience includes a variety of industries, such as manufacturing, retail, automotive, contract research, environmental remediation, engineering and construction supply.

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