Centers for Medicare and Medicaid Services

Eventually, any health care organization with an effective compliance program is very likely to discover an issue that raises potential liability and requires disclosure to a government entity. While we largely discuss False Claims Act (FCA) litigation and defense issues on this blog, a complementary issue is how to address matters that raise potential liability risks for an organization proactively.

On August 11, 2017, a group of affiliated home health providers in Tennessee (referred to collectively as “Home Health Providers”) entered into an FCA settlement agreement with the US Department of Justice (DOJ) and the US Department of Health and Human Services Office of Inspector General (OIG) for $1.8 million to resolve self-disclosed, potential violations of the Stark Law, the Federal Anti-Kickback Statute, and a failure to meet certain Medicare coverage and payment requirements for home health services. This settlement agreement underscores the strategic considerations that providers must weigh as they face self-disclosing potential violations to the US government. Continue Reading DOJ Settlement with Home Health Providers Underscores Strategic Considerations for Self-Disclosure

On May 31, 2017, the US Department of Justice announced a Settlement Agreement under which eClinicalWorks, a vendor of electronic health record software, agreed to pay $155 million and enter into a five-year Corporate Integrity Agreement to resolve allegations that it caused its customers to submit false claims for Medicare and Medicaid meaningful use payments in violation of the False Claims Act.

Read the full article.

In a case of first impression, a federal court found that the federal physician self-referral law’s (Stark Law) requirement that financial arrangements with physicians be memorialized in a signed writing could be material to the government’s payment decision. This case raises troubling questions about applying the False Claims Act (FCA) to what many in the industry consider “technical” Stark issues, especially given the Supreme Court’s description of the materiality test as “demanding” and not satisfied by “minor or insubstantial” regulatory noncompliance.

United States ex rel. Tullio Emanuele v. Medicor Associates (Emanuele), in the US District Court for the Western District of Pennsylvania, involves Medicor Associates, Inc., a private medical group practice (Medicor), and Hamot Medical Center’s (Hamot) exclusive provider of cardiology coverage. Tullio Emanuele, a qui tam relator and former physician member of Medicor, alleged that Hamot, Medicor, and four of Medicor’s shareholder-employee cardiologists (the Physicians) violated the FCA and Stark Law because Hamot’s multiple medical director compensation arrangements with Medicor failed to satisfy the signed writing requirement in the Stark Law’s personal services or fair market value exceptions during various periods of time. The US Department of Justice declined to intervene in the case, but filed a statement of interest in the summary judgment stage supporting the relator’s position. Continue Reading Is the Stark Law’s “Signed Writing” Requirement Material to Payment: One Federal Court Says Yes

On May 1, 2017, the US Court of Appeals for the Third Circuit affirmed the dismissal of United States ex rel. Petratos, et al. v. Genentech, Inc., et al., No. 15-3801 (3d. Cir. May 1, 2017). On appeal from the US District Court for the District of New Jersey, the Third Circuit reinforced the applicability of the materiality standard set forth by the US Supreme Court in Universal Health Services v. Escobar. Per the Court, the relator’s claims implicate “three interlocking federal schemes:” the False Claims Act (FCA), Medicare reimbursement, and US Food and Drug Administration (FDA) approval.

The relator, Gerasimos Petratos, was the former head of health care data analytics at Genentech.  He alleged that Genentech suppressed data related to the cancer drug Avastin, thereby causing physicians to certify incorrectly that the drug was “reasonable and necessary” for certain Medicare patients. This standard is drawn from Medicare’s statutory framework: “no payment may be made” for items and services that “are not reasonable and necessary for the diagnosis and treatment of illness or injury.” 42 U.S.C. § 1395y(a)(1)(A) (emphasis added).  In turn, the Centers for Medicare and Medicaid Services (CMS) consider whether a drug has received FDA approval in determining, for its part, whether a drug is “reasonable and necessary.” Petratos claimed that Genentech “ignored and suppressed data that would have shown that Avastin’s side effects for certain patients were more common and severe than reported.” Petratos further asserted that analyses of these data would have required the company to file adverse-event reports with the FDA and could have triggered the need to change Avastin’s FDA label.

Continue Reading Third Circuit Affirms Dismissal of FCA Suit against Genentech Based on Supreme Court’s Materiality Standard

The good, reassuring news about that “old dog” fraud and abuse as it enters an age of payment reform is that criminal liability for fraud still requires a specific intent to defraud the federal health care programs, anti-kickback liability still requires actual knowledge of at least the wrongfulness, if not the illegality, of the financial transaction with a referral source, and civil False Claims Act liability for Stark Law violations still requires actual knowledge, a reckless disregard for, or deliberate ignorance of the Stark Law violation. This should mean that good faith and diligent efforts to comply with law, including seeking and following legal counsel, still go a long way in managing an organization’s and individual executive’s risk under the fraud and abuse laws. The bad, unsettling news about fraud and abuse in an age of payment reform, however, is that (1) anxiety about reform and stagnating and declining physician incomes are propelling a spike in transactions between health systems and physicians at a time when qui tam plaintiffs and the law firms that represent them are aggressively challenging the legitimacy and common structures for these transactions; and (2) the Stark Law is largely indifferent to the good faith intentions of health systems to integrate and enter into coordinated care arrangements with physicians, and continues to impose on health systems heavy burdens of proof that the arrangements comply with ambiguous standards like fair market value, volume or value and commercial reasonableness. While financial transactions incident to the Centers for Medicare and Medicaid Services’ (CMS) innovative care delivery and payment initiatives, such as accountable care organizations (ACOs), medical homes and bundled payment arrangements can be protected by the fraud and abuse/Stark waivers discussed in Part B below, there are many other common transactions and arrangements with physicians still operating in a fee-for-service environment  (such as practice acquisitions, employment, “gainsharing,” service line co-management, pay-for-quality and non-ACO clinically integrated networks) that are not protected by the waivers. During this period of transition to transformation of the health delivery and payment system, the key areas of risk for health systems are their burdens of proof on the ‘big three” issues of:

  • Fair market value,
  • Volume or value, and
  • Commercial reasonableness.

Each is discussed separately below, and the industry practices for managing these risks. Please note that none of these practices are necessarily “best” or “normative” practices, but are what we have observed.

Read the full article here.

In many industries, but especially health care, the amount of regulation and guidance issued by the responsible agencies is tremendous and continues to grow.  The Centers for Medicare and Medicaid Services (CMS) is no exception.  In a recent appeal by a home health agency, the Tenth Circuit examined the “pace [of CMS’] frenetic lawmaking,” finding that CMS applied a homebound status definition and documentation requirement that did not exist at the time the claims were submitted.

In Caring Hearts Personal Home Services., Inc. v. Burwell, No. 14-3243, 2016 BL 171256, (May 31, 2016), CMS litigated an alleged overpayment of about $800,000 for medically unnecessary home health services through the entire administrative process.  The services were provided in 2008, but, according to the Tenth Circuit, CMS applied the more restrictive 2010 version instead.  CMS took the position in this litigation that the 2010 changes simply clarified the prior rule and made it more consistent with the governing statute.  The Administrative Law Judge, the Department Appeals Board and even the United States District Court took the same view.  On appeal the Tenth Circuit disagreed.

The Tenth Circuit found that the 2008 version of the regulation applied to the claims, that Caring Hearts home health services and documentation content complied with that regulation, and that the statute did not clearly support CMS’ litigation position.  In 2008, CMS’s homebound definition stated that, “[g]enerally speaking, a patient will be considered homebound if they [sic] have a condition due to an illness or injury that restricts their ability to leave the place of residence except with the aid of: supportive devices such as crutches, canes, wheelchairs, and walkers … .”  In 2010, CMS added a second, more restrictive requirement – the patient must also “normal[ly]” be unable “to leave home” even with a wheelchair and any attempt to leave home must also “require a considerable and taxing effort.”  As for documentation requirements, no requirements existed in 2008.  The specific requirements CMS said the agency did not comply with were not created until 2010.

While Caring Hearts was dealt the lemon of defending this case, the opinion yields some potentially valuable lemonade in useful lessons and precedents for the rest of the health care community.  First, due to the way the case was argued below, the Tenth Circuit was not presented with a direct Chevron challenge to CMS’ homebound definition or documentation requirements.  While the court took some pains to say that it was not opining on whether the current homebound definition or documentation requirements were consistent with the statute, 42 U.S.C. § 1395f(a)(8), the opinion lays out a roadmap to this challenge.

Second, the court had the unusual opportunity to opine on section of the Social Security Act, 42 U.S.C. § 1395pp.  This section creates, according to the Tenth Circuit, “a sort of good faith affirmative defense” that permits payment for claims that are not payable for specific reasons, including for patients who do not qualify as homebound, if the provider did not know, and could not reasonably have been expected to know, that payment would not be made for such items or services.  In this case, the agency argued that it could not have been expected to know CMS’ interpretation of the 2008 rules, and therefore, CMS should deem the claims payable under 42 U.S.C. § 1395pp.  The Tenth Circuit agreed with the agency’s argument in vacating the district court decision.

The 42 U.S.C. § 1395pp defense could be a relevant point to make in many cases involving medical necessity or clinical judgment issues that the government has shown interest in pursuing under the False Claims Act other than homebound status, such as hospice eligibility and the appropriateness of inpatient status for a patient under the current “two midnight” rule.  For example, in U.S. ex rel. Paradies v. AseraCare, Inc., the court ruled, in considering hospice eligibility, that the difference of opinion in clinical judgment between medical experts alone cannot support a falsity claim under the False Claims Act (FCA).  Similarly, a provider’s good faith reliance on a contemporaneous medical opinion of a physician that the patient was homebound or hospice eligible could support finding the claim payable under 42 U.S.C. § 1395pp.  The standard “could not reasonably have been expected to know” appears to be less demanding that the FCA’s “reckless disregard or deliberate ignorance” standard.

However, this case does not lessen the burden the health care industry faces in achieving full compliance with voluminous federal regulatory requirements.  The Tenth Circuit noted that “currently about 37,000 separate guidance documents can be found on CMS’s website — and even that doesn’t purport to be a complete inventory.”  And this is only one federal program.

There has been a flurry of judicial and administrative activity regarding the Stark Law in recent weeks, bringing both promises of reprieve for the health care industry in complying with the technicalities of the law, and reminders of the need for executive vigilance when evaluating and approving transactions with referring physicians.

  • On July 15, 2015, the Centers for Medicare & Medicaid Services (CMS) issued a notice of proposed rulemaking to amend the Stark regulations and to solicit comments from the health care industry on whether the Stark Law is a barrier to health care reform. Among other proposed amendments, CMS proposes: (1) to add two new compensation exceptions, (2) to expand the grace period for the signature requirement of various exceptions in some instances, and (3) to extend the six-month holdover provision of various exceptions. CMS also made several agency policy statements, including clarifying that signed writings do not need to be formal agreements and that the one-year term requirement of certain exceptions is satisfied when an arrangement in fact lasts for at least one year.  For a detailed overview of the proposed rule and its implications, see the Special Report. CMS’s proposals to relax the technical requirements of various Stark Law exceptions, if implemented, would be a welcome reprieve to the health care industry by addressing the potentially draconian consequences of such seemingly innocent situations as a late signature on an agreement with a referring physician.  Comments on the proposed rule are due September 8, 2015.
  • On July 2, 2015, the U.S. Court of Appeals for the Fourth Circuit upheld a $237 million False Claims Act judgment based on Stark Law violations related to part-time employment contracts between a hospital system and referring physicians in United States ex rel. Drakeford v. Tuomey, rejecting the defendant’s request for a new trial based on multiple errors by the trial court and its constitutional challenges to the trial court’s award of damages and penalties. We previously posted about this decision. (For more details, see here.) The ruling raises questions related to the advice of counsel defense and scienter, and the meaning and application of the Stark Law’s “volume or value” standard.
  • On June 12, 2015, the U.S. Court of Appeals for the District of Columbia Circuit struck down CMS’s regulatory prohibition on “per-click” equipment rental arrangements with referring physicians, but upheld CMS’s prohibition on “under arrangements” transactions. We previously posted about this decision. As we noted in that post, while it is not clear how CMS will respond to the ruling, if at all, per-click equipment rental arrangements still face scrutiny by the Office of the Inspector General (OIG) under the federal anti-kickback statute.  The OIG has not taken the position that such per-click equipment rentals automatically create liability under the anti-kickback statute, but the risk of such potential liability under the federal anti-kickback statute (as well as state anti-kickback statutes) should be carefully considered.

The Office of Audit Services of the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services has begun a nationwide audit of a random sample of providers that have received incentive payments for achieving “meaningful use” under the Medicare Electronic Health Record (EHR) Incentive Program from January 1, 2011 to June 30, 2014.  Medicare pays EHR incentive payments for up to five years to physicians and hospitals that achieve meaningful use of certified EHR technology each year.  Providers that fail to achieve meaningful use face payment reductions beginning in 2015.

The OIG announced its intention to conduct these audits in its Work Plan for FY 2015. The OIG stated that it will review certain, but not all, meaningful use measures to determine whether providers received incentive payments in error.  Among the measures covered by the OIG audits is the core meaningful use measure that requires providers to conduct a comprehensive security risk analysis in accordance with the Health Insurance Portability and Accountability Act Security Rule.

OIG is sending audit notice letters requesting specific information and documents, including documentation of compliance with the particular meaningful use measures under review, to each provider in the audit sample. Providers should have documentation for each of the measures such as measure calculation reports printed from the provider’s EHR system, security risk analysis reports, and dated screen prints that demonstrate that the provider met the measure during the meaningful use reporting period or otherwise by the applicable deadline.

When responding to the OIG audits, providers should be mindful that deficiencies identified for one physician in a physician group or one hospital within a multi-hospital system, may apply to the other physicians and hospitals using the same EHR system and/or implementing meaningful use in the same way.  Thus, the incentive payments at risk in an audit may be greater than the payments to the particular provider being audited.

The OIG audits are in addition to the meaningful use audits conducted by Figliozzi & Company, the outside audit contractor of the Centers for Medicare and Medicaid Services. Unlike the Figliozzi audits, which cover a MU attestation for a single meaningful use reporting period, the OIG audits cover incentive payments paid from January 1, 2011 through June 30, 2014.  2011 is the first year that Medicare paid EHR incentive payments.  For more information about the Figliozzi meaningful use audits, see “What Have We Learned from Audits under the Medicare EHR Incentive Program?

With a motion to dismiss pending in the United States District Court for the Southern District of New York, United States of America ex rel. Kane v. Continuum Health Partners, Inc., Case No. 11-2325, is the False Claims Act (FCA) case to watch in 2015.  It is the first “reverse false claims” case where the United States intervened, and its only allegation involves a failure to timely report and refund overpayments to the government.

In 2010, the Affordable Care Act (ACA) modified the FCA’s reverse false claims provision (31 U.S.C. § 3729(a)(1)(G)), making a party liable for failing to report and return an overpayment within 60 days of the date it is “identified.”  See 42 U.S.C. § 1320a−7k(d).  Five years after the passage of the ACA, however, it remains unclear what it means for an overpayment to be “identified,” thereby triggering the 60-day clock.  The Centers for Medicare and Medicaid Services (CMS) has not issued any guidance concerning refunding overpayments to Medicaid.  In February 2012, CMS issued proposed regulations on this topic for Medicare Parts A and B, which it has yet to finalize.  In fact, CMS just announced, on February 13, 2015, that it will delay its final guidance until at least February 2016—likely well after the district court issues its decision in Continuum Health.

According to the government’s complaint, filed on June 27, 2014, three hospitals in New York City operated by Continuum Health (which is now part of Mount Sinai Health System) submitted improper claims to Medicaid in 2009 and 2010, as a result of a glitch with its billing software. The New York State Comptroller first notified Continuum Health in September 2010 that it had erroneously billed Medicaid for a small number of claims.  Continuum Health then conducted an internal investigation.  On February 4, 2011, the relator e-mailed a spreadsheet to his superiors at Continuum Health with what he believed to be about 900 improperly-submitted claims resulting from the same software issue.  Four days later, Continuum Health terminated the relator.

Over the next two years, Continuum Health refunded the overpayments associated with the initial list of 900 claims.  The government alleges that Continuum Health made these refunds largely in response to continued inquiries from the NYS Comptroller about additional claims. And, it claims that Continuum Health refunded 300 of the overpayments only after it received a Civil Investigative Demand from the U.S. Department of Justice.  Nonetheless, the government did not intervene in the case until a year after Continuum Health refunded all overpayments to Medicaid.

In its motion to dismiss, Continuum Health makes three arguments:

First, it contends that it had no “obligation” to report and refund the overpayments.  The relator’s February 4, 2011, e-mail did not “identify” any overpayments, thereby triggering the 60-day clock.  Rather, the e-mail was a preliminary list of potential overpayments that, by the relator’s own admission, required “further analysis to corroborate his findings.”  According to Continuum Health, the government’s position that “mere notice of a potential but unconfirmed overpayment” will “identify” that overpayment is untenable.  Indeed, 60 days is not enough time to complete the sort of complex factual investigation and legal analysis that is typically required to determine whether there is an actual overpayment.

Second, Continuum Health argues that, even if an “obligation” existed after the relator sent his e-mail, it did not knowingly “conceal[]” or “avoid[]” that obligation.  Continuum Health argues that concealing and avoiding require affirmative action, not the failure to act.

Finally, Continuum Health claims that it does not have an obligation to repay the federal government, because Medicaid is operated at the state level.  Consequently, any alleged failure to report and refund overpayments does not create liability under the FCA.

The government responds to Continuum Health’s arguments in turn.

First, it argues that when construing the term “identified,” the court should look to CMS guidance concerning refunding overpayments to Medicare Advantage and Part D.  Under that guidance, a healthcare provider “has identified an overpayment” when it “has determined, or should have determined through the exercise of reasonable diligence, that [it] has received an overpayment.”  According to the government, Continuum Health failed to act with reasonable diligence after it received the relator’s e-mail.  The government rejects Continuum Health’s interpretation of “identified”—claiming that it allows the provider to choose when, or even if, to start the 60-day clock, despite how much information it possesses concerning the overpayment.

Second, the government argues that Continuum Health “knowingly avoid[ed]” its repayment obligation because, after it learned that it received overpayments, it “failed to take remotely reasonable steps to return those funds to Medicaid.”

Finally, the government contends that the FCA has always reached Medicaid claims.  Indeed, according to the government, the ACA defines “overpayment” to specifically include overpayments to Medicaid.

Although briefing closed with Continuum Health’s reply on December 8, 2014, for healthcare providers throughout the United States, many issues remain open.  With further CMS guidance on the meaning of “identified” delayed for another year, the decision in Continuum Health will likely provide the first guidance about what the law requires.  We will continue to monitor this case and keep you updated.