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Tenth Circuit Says “CMS Is Unfamiliar With Its Own Law” In Pursuing Home Health Agency for Overpayments

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 [...]

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Fifth Circuit Affirms Summary Judgment where Whistleblower Offered No Evidence of the Requisite Scienter

On March 7, the U.S. Court of Appeals for the Fifth Circuit affirmed a grant of summary judgment by the U.S. District Court for the Northern District of Texas in favor of Kaner Medical Group and its owner, David Kaner, in a qui tam suit brought under the False Claims Act (FCA).  United States ex rel. Johnson v. Kaner Med. Grp., 2016 WL 873816 (5th Cir. Mar. 7, 2016).  The suit was filed by a former employee of the group, who alleged that the group submitted false claims for reimbursement to Medicare and TRICARE, and that she was terminated in retaliation for raising concerns regarding the group’s billing practices.

The relator’s FCA claims were based on the group’s practice of entering the National Provider Identifier (NPI) of the provider who referred a patient to the group’s allergy clinic on Medicare claims in a box that, according to instructions from the Centers for Medicare & Medicaid Services (CMS), should have contained the NPI of the provider who supervised the work carried out at the allergy clinic on the day the patient received the service.  The district court found that, although the summary judgement record indicated the possibility that a large number of the group’s claims forms had incorrect provider information, the evidence did not show that the performing medical assistants lacked the requisite supervision or that the services were rendered under circumstances that would cause the group not to be entitled to payment.  U.S. ex rel. Johnson v. Kaner Med. Grp., 2015 WL 631651 (N.D. Tex. Feb. 12, 2015).  Instead, the record “provide[d] evidence that defendants perhaps were negligent in their indications on some of the forms of healthcare provider information.”

In affirming the district court, the appeals court found that the relator presented no evidence that the group acted “knowingly,” i.e., with actual knowledge of information or in deliberate ignorance or reckless disregard with respect to the truth or falsity of the information.  Instead, the appeals court agreed with the district court that the record indicated that “at most, [the group’s] misunderstanding of CMS’s requirements was negligent, which is not sufficient to attach liability under the FCA.”  As the court found in favor of the group on summary judgment, it also found that the relator did not engage in protected activity under the whistleblower protections of the FCA, and affirmed the dismissal of her retaliation claim.

As the outcome in this case demonstrates, the fact that a health care provider has improperly billed Medicare is not enough to support an FCA claim.  Among other things, a plaintiff must raise a genuine dispute of material fact that a defendant knowingly asked Medicare to pay amounts it does not owe.  As the court noted, the FCA “is not a general ‘enforcement device’ for federal statutes, regulations and contracts. . . but the Government’s ‘primary litigation tool’ for recovering losses resulting from fraud.”




CMS Issues Final Rule Governing the Return of Overpayments within 60 Days

On February 11, 2016, the Center for Medicare and Medicaid Services (CMS) issued the much-anticipated final rule concerning Section 6402(a) of the Affordable Care Act, the so-called “60 Day Rule.” This section requires Medicare and Medicaid providers, suppliers and managed care contractors to report and return an overpayment by the later of “60 days after the date upon which the overpayment was identified or the date any corresponding cost report was due, if applicable.” CMS delayed adopting the rule to address public comments concerning, among other things, (1) the meaning of “identify” (i.e., what starts the 60-day clock); and (2) the length of the “lookback period.” This rule is of critical importance to healthcare providers seeking to avoid liability for reverse false claims under the False Claims Act (FCA).

Under the new regulation, 42 C.F.R. § 401.305, the 60-day clock starts when a provider has identified an overpayment, which is defined as “when the person has, or should have through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment. A person should have determined that the person received an overpayment and quantified the amount of the overpayment if the person fails to exercise reasonable diligence and the person in fact received an overpayment.” Backing off from the proposed 10-year lookback period, CMS finalized a six-year lookback period.

The key element of the final rule clarifies that the 60-day clock does not start to tick while the provider is conducting its “reasonable diligence” into whether the provider has received an overpayment and is quantifying the amount of the overpayment. While this concept was discussed in the proposed rule’s preamble, many commenters expressed concern about the meaning of the proposed rule’s “reckless disregard or deliberate ignorance of the overpayment” standard and whether it allowed time for the provider to take the steps necessary to determine whether it received an overpayment and, if so, its amount. In addition, some viewed the court’s interpretation of the statute in United States ex rel. Kane v. Healthfirst, Inc. (see our prior blog post), as stating that the 60-day clock began as soon as the provider was “put on notice” of a potential overpayment. CMS’ final rule clearly states that this interpretation of Kane is incorrect – providers have the ability to conduct “reasonable diligence” into the fact and amount of the overpayment prior to the 60-day time period starting. However, CMS does not view the reasonable diligence period as never-ending. The preamble discusses a six-month time frame as a “benchmark” for how long the reasonable diligence should take absent “extraordinary circumstances” such as a physician self-referral law (Stark Law) issue. The rule also says that the 60-day clock begins on the day the provider received the information about the potential overpayment and failed to exercise reasonable diligence.

These “should have determined” and “reasonable diligence” concepts have implications for how the government and defendants will [...]

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District Court Denies Motion to Dismiss in Government’s First Reverse False Claims Case

On August 3, 2015, the United States District Court for the Southern District of New York issued  an opinion interpreting the Affordable Care Act’s (ACA) so-called “60-day rule.”  In United States of America ex rel. Kane v. Continuum Health Partners, Inc., Case No. 11-2325.  The court denied the defendants’ motion to dismiss the government’s False Claims Act (FCA) complaint alleging failure to timely report and refund overpayments pursuant to the 60-day rule, in violation of the FCA’s “reverse false claims” provision.  In doing so, the district court provided the first guidance on what it means for an overpayment to be “identified” by a provider, thereby triggering the ACA’s 60-day repayment period under 42 U.S.C. § 1320a-7k(d).  The court held that the 60-day clock for an “identified overpayment” starts running “when a provider is put on notice of a potential overpayment, rather than the moment when an overpayment is conclusively ascertained.”

Continuum Health became closely-watched after the government decided to intervene—a first for reverse false claims cases based solely on the ACA’s 60-day rule—and after the Center for Medicare & Medicaid Services (CMS) decided in February to delay further guidance on the meaning of “identified” under Medicare Parts A and B for at least another year.  In a previous post, we set out the case’s statutory and factual background, the arguments advanced by the defendants in their motion to dismiss and the government’s responses.

On Monday, the court rejected the defendants’ argument that the relator’s e-mail did not “identify” overpayments within the meaning of the ACA (and thus that they did not mature into an “obligation” under the FCA), because the e-mail only described potential, not actual, overpayments.  In holding that notice of potential overpayments is sufficient to trigger the 60-day clock, the court acknowledged the practical difficulties this interpretation presents:

[I]t is certainly the case that the Government’s interpretation of the ACA can potentially impose a demanding standard of compliance in particular cases, especially in light of the penalties and damages available under the FCA. Under the definition of “identified” proposed by the Government, an overpayment would technically qualify as an “obligation” even where a provider receives an email like Kane’s, struggles to conduct an internal audit, and reports its efforts to the Government within the sixty-day window, but has yet to isolate and return all overpayments sixty-one days after being put on notice of potential overpayments. The ACA itself contains no language to temper or qualify this unforgiving rule; it nowhere requires the Government to grant more leeway or more time to a provider who fails timely to return an overpayment but acts with reasonable diligence in an attempt to do so.

Nonetheless, the court held these concerns were mitigated because merely establishing an overpayment does not itself establish an FCA violation—a relator or the government must also prove knowing concealment or knowing and willful avoidance or decreasing of the repayment obligation under the FCA’s reverse false claims provision, 31 U.S.C. § 3729(a)(1)(G).  [...]

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Overview of Recent Stark Law Developments

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.
  • [...]

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Court Upholds CMS’ Prohibition on ‘Under-Arrangements’ Transactions, Strikes Down CMS’ Prohibition on ‘Per-Click’ Equipment Rental Arrangements

A 2008 rule change from the Centers for Medicare and Medicaid (CMS)—which effectively prohibited referring physician-owned companies from furnishing hospital services “under arrangements”—has withstood a challenge by a urology trade association. On June 12, 2015, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) held in Council for Urological Interests v. Burwell that the 2008 rule change, which redefined an “entity furnishing designated health services” to include entities that perform the services, not just bill for them, constituted a reasonable construction of the Stark Law and was entitled to deference. The appellate court, however, held that CMS’ prohibition on “per-click” equipment rental arrangements lacked a rational basis in light of the agency’s “tortured reading” of a relevant conference report, which, the court noted, was “the stuff of caprice.” Accordingly, the court struck down CMS’ 2008 prohibition on per-click equipment rental arrangements involving referring physician-owned equipment leasing companies.

Read the full On the Subject discussing the announcement.




New OIG Reports Peg Billing Trends and Prescribing Hotspots as Harbingers of Part D Fraud

On Tuesday, June 23, the U.S. Department of Health & Human Services Office of Inspector General (OIG) released two reports that hone in on data patterns showing potential fraud and abuse in the Medicare Part D program.  These reports were released less than a week after a coordinated national Medicare fraud takedown that included a significant number of Part D-related targets.

Medicare Part D is the optional prescription drug benefit for Medicare beneficiaries that went into effect in 2006.  In 2013, over 39 million beneficiaries were enrolled in the program.  The Centers for Medicare & Medicaid Services (CMS) relies on Part D plan sponsors and the Medicare Drug Integrity Contractor (MEDIC) to help CMS detect and prevent fraud, waste and abuse in the Part D program.

The OIG utilized Part D data analytics to identify three main trends that it sees as potential indicators of Part D fraud: increased spending for commonly abused opioids, over 1,400 pharmacies with questionable Part D billing patterns and specific geographic “hotspots” for specific non-controlled drugs.  The OIG provided five examples of hotspots around the country and compared per-beneficiary payment rates in the hotspots to the national averages.

The OIG issued this report in tandem with another document summarizing the work that  has been done thus far by OIG and CMS in identifying and addressing Part D program integrity weaknesses.  It also touched on MEDIC’s increased authority to access claims data from Medicare Parts A and B in its efforts to combat fraud.  This document emphasized that CMS, MEDIC, and Part D sponsors need to increase their efforts to address Part D fraud and abuse.  OIG also pushed for increased data collection, including expanded reporting requirements and drug utilization review programs, and for the implementation of even more robust oversight efforts, including mechanisms to recover payments from Part D sponsors.

Part D sponsors, pharmacies and providers should be keenly aware of the OIG’s continuous efforts to identify and combat against potential areas of fraud in the Part D program.  Active prescribers located in the OIG’s current hotspots should also prepare for increased scrutiny and continue their efforts to maintain compliance programs that can resolve any statistical issues the OIG may identify.

Read the full reports at https://oig.hhs.gov/oei/reports/oei-02-15-00190.pdf and https://oig.hhs.gov/oei/reports/oei-03-15-00180.pdf.




Recent OIG Report Spotlights Millions in Overpayments Caused by Physician Place-of-Service Coding Errors

On May 6, 2015, the Office of Inspector General (OIG) for the U.S. Department of Health & Human Services (HHS) released a report on overpayments attributed to incorrect physician place-of-service coding. The report determined that Medicare potentially overpaid physicians approximately $33.4 million for incorrectly coded services that were provided from January 2010 through September 2012.

As part of their claims submissions, physicians and other Medicare suppliers are required to report the setting in which they furnish services. This setting designation (either “facility” or “non-facility”) is a decisive reimbursement factor as Medicare only reimburses physicians for overhead expenses if their services are provided in a non-facility setting (e.g., physician offices and independent clinics). The OIG report compared same-day physician and facility claims to determine how often physicians performed services in facility locations but incorrectly coded the services as performed in non-facility locations. Of $33.4 million in estimated overpayments, approximately 75 percent were made for services provided in a hospital outpatient setting but coded as a non-facility claim. The other roughly 25 percent of the overpayments were made for miscoded services provided in ambulatory surgery centers.

The OIG attributed the overpayments to physician-level internal control weaknesses as well as insufficient Medicare contractor post-payment reviews. The OIG recommended that the Centers for Medicare & Medicaid Services (CMS) direct its Medicare contractors to initiate and monitor recoveries of the overpayments identified by the report (as of December 2014, $1.75 million of the 2010 overpayments had already been recovered). Other recommendations included more comprehensive education efforts and directives for Medicare contractors to perform similar place-of-service audits on high-risk physician services and recover any resulting overpayments.

Given the report’s recommendations, physician practices and employers should ensure they are proactively managing compliance to include periodic internal audits of place-of-service coding. By doing so, providers can better protect themselves from potential overpayment liability and can make more timely decisions about corrective actions and government disclosures.

Read the full report: “Incorrect Place-of-Service Claims Resulted in Potential Medicare Overpayments Costing Millions”




CMS Appears Receptive to Senators’ Requests to Change Focus of RAC Program to Providers with High Claims Denials

Last Thursday, in a hearing before the Senate Special Committee on Aging exploring the relationship between Recovery Audit Contractor (RAC) audits and an increase in claims for hospital observation stays, a bipartisan duo of senators urged the Centers for Medicare & Medicaid Services (CMS) to shift the focus of RAC audits to providers that have high levels of claims denial. CMS officials seemed to agree with the senators’ concerns, suggesting that RAC audits will increasingly target providers with higher claims denial rates.

The RAC program was created under the Medicare Modernization Act of 2003 to detect and correct improper Medicare payments. In her opening remarks, Sen. Claire McCaskill (D-MO) criticized the program for focusing its energy on “auditing the appropriateness of short-term [hospital] stays.” As a result, Sen. McCaskill stated, CMS spends more resources in the inpatient setting at the expense of others. Instead, RAC should target providers with higher denial rates, she stressed. “I’m concerned that more than half the RAC audits are for inpatient hospital admissions, when that appears to be out of sync with both the proportion of inpatient claims to total Part A and B claims, as well as out of sync with where CMS’s own contractors say there are higher improper payment rates,” she said.

Committee Chairwoman Susan Collins (R-ME) similarly urged CMS to refocus RAC audits on so-called “outliers” – providers with high rates of denied Medicare claims – “rather than applying the compliance efforts across the board.” In response, Sean Cavanaugh, deputy administrator and director of CMS, said that the agency has in fact already started to change the RAC process. “We’ve already begun with the current RAC contracts to require them to focus on providers where they find a high denial rate and to move on from providers who are consistently billing in accordance with our rules,” he said. Cavanaugh added that CMS is also considering provider feedback regarding its “two-midnight” policy – which clarifies when a patient acquires “inpatient” status under Medicare – and will respond in a proposed rule later this summer.

If implemented, the senators’ suggestions to shift the focus of the RAC process could ease a massive audit appeals backlog in CMS, which has come under fire from lawmakers and providers. At the same time, providers that have higher rates of claims denials should be aware that RAC auditors may soon come knocking.




OIG Audits Begin for Meaningful Use Compliance

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?




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