Medicare Update

OIG Publishes Draft Supplemental Compliance Program Guidance for Nursing Facilities

On April 15, 2008, the Department of Health and Human Services' Office of Inspector General (OIG) released Draft OIG Supplemental Compliance Program Guidance (CPG) For Nursing Facilities.  The draft supplemental CPG for nursing facilities is intended to supplement the OIG's original CPG for nursing facilities, which was published in the Federal Register on March 16, 2000.  In fact, the OIG reports that the 2 documents "collectively offer a set of guidelines that nursing facilities should consider when developing and implementing a new compliance program or evaluating an existing one." The Draft OIG Supplemental Compliance Program Guidance (CPG) For Nursing Facilities is expected to appear as a Proposed Notice in the Federal Register on April 16, 2008.

OIG Releases Open Letter to Health Care Providers

On April 15, 2008, the Department of Health and Human Services' Office of Inspector General (OIG) issued a Press Release announcing the release of an Open Letter to Health Care Providers. 

The Open Letter to Health Care Providers discusses refinements and clarifications that the OIG believes will increase the efficiency of the OIG's Provider Self-Disclosure Protocol and benefit providers who self-disclose.  Among other things, the Open Letter to Health Care Providers indicates that the OIG has concluded that an initial submission must include the following:

• a complete description of the conduct being disclosed;
• a description of the provider's internal investigation or a commitment regarding when it will be completed;
• an estimate of the damages to the Federal health care programs and the methodology used to calculate that figure or a commitment regarding when the provider will complete such estimate; and
• a statement of the laws potentially violated by the conduct.

In addition, the Open Letter to Health Care Providers indicates that providers must be in a position to complete the investigation and damages assessment within 3 months after acceptance into the Provider Self-Disclosure Protocol.  The Open Letter to Health Care Providers also reminds providers that the Provider Self-Disclosure Protocol is intended to facilitate the resolution of matters that potentially violate Federal criminal law, civil law, or administrative laws for which exclusion or civil monetary penalties are authorized and not mere billing errors or overpayments.  Further, the Open Letter to Health Care Providers states:

"A provider's submission of a complete and informative disclosure, quick response to OIG's requests for further information, and performance of an accurate audit are indications that the provider has adopted effective compliance measures.  Accordingly, when we negotiate the resolution of OIG's applicable administrative monetary and permissive exclusion authorities in exchange for an appropriate monetary payment, we generally will not require the provider to enter into a Corporate Integrity Agreement or Certification of Compliance Agreement.  We believe that this presumption in favor of not requiring a compliance agreement appropriately recognizes the provider's commitment to integrity and also advances our goal of expediting the resolution of self-disclosures."   

In 1998, the OIG introduced the Provider Self-Disclosure Protocol to encourage health care providers to voluntarily disclose self-discovered evidence of potential fraud against the Federal health care programs.  The OIG reports that the Provider Self-Disclosure Protocol has resulted in approximately $120 million being returned to the Medicare Trust Fund.

OIG Publishes Interim Final Rule on Advisory Opinion Process

On March 26, 2008, the Department of Health and Human Services' Office of Inspector General (OIG) published an interim final rule (with comment period) in the Federal Register revising the process for submitting payments for advisory opinion costs. According to the interim final rule, the OIG will no longer require that requestors submit an initial deposit payment of $250 for each advisory opinion request.  Instead, the OIG will require that requestors make payment for advisory opinion costs via electronic funds transfer. The interim final rule is effective on April 25, 2008. However, the OIG may implement the process before that date.

OIG Recommends Further Strengthening DMEPOS Supplier Enrollment Process

On March 3, 2008, the Department of Health and Human Services' Office of Inspector General (OIG) issued a Press Release announcing the release of a Report entitled Los Angeles County Suppliers' Compliance With Medicare Standards: Results From Unannounced Visits (Report).

According to the Report, Los Angeles is a high-risk area for fraudulent activity involving suppliers of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS).  Further, the Report indicates that in late 2007 the OIG conducted unannounced site visits on 905 DMEPOS suppliers in Los Angeles County.  During the visits, the OIG focused on 4 DMEPOS supplier standards that could be quickly verified through observation.  The 4 standards require that suppliers:

• maintain physical facilities;
• be accessible during business hours;
• have visible signs; and
• post hours of operation.

The OIG found that 115 of the 905 suppliers (or 13 percent) did not maintain physical facilities or were not open during unannounced site visits.  Furthermore, the Report indicates that 79 suppliers (or 9 percent) were open but did not meet at least one of the 2 additional standards (i.e., did not post hours of operation or post signs indicating a business name). 

The OIG also found that 124 suppliers (or 14 percent) met the 4 requirements, but their claims had in common an atypical characteristic. For instance, the OIG reports that more than half of the beneficiaries for whom the suppliers billed did not receive other Medicare services (such as an office visit) from the physicians who ordered the DMEPOS. The OIG reports that this characteristic is prevalent among non-compliant suppliers.

In the Report, the OIG recommends that the Centers for Medicare & Medicaid Services (CMS) strengthen the Medicare DMEPOS supplier enrollment process and ensure that suppliers meet Medicare supplier standards.  In fact, the OIG continues to recommend that CMS:

• conduct more unannounced site visits to suppliers, which could include full site inspections and abbreviated site inspections, to supplement, not replace full site inspections and to determine whether suppliers still exist at the addresses on record;
• perform more rigorous background checks of applicants and currently enrolled high-risk suppliers (including business owners and managing employees);
• assess the fraud risk of suppliers and focus monitoring and enforcement on high-risk suppliers;
• increase prepayment review of DMEPOS claims, especially claims from new suppliers and suppliers deemed high risk;
• require suppliers in areas particularly vulnerable to fraud and abuse to reenroll with the National Supplier Clearinghouse more frequently than every 3 years; and
• strengthen the Medicare supplier standards by establishing a minimum number of hours of operation and establishing minimum inventory requirements for product and service types.

In addition, the OIG recommends that CMS:

• require all suppliers to pay a Medicare enrollment application fee to cover the cost of:
  • full site inspections or abbreviated site inspections to monitor suppliers' compliance with Medicare standards; and
  • criminal background checks;
• require a supplier to pay an additional Medicare enrollment fee if, during a site visit (conducted during business hours), the supplier's facility is closed or inaccessible, necessitating an additional site visit; and
• seek legislative authority to impose temporary moratoriums, on an as needed basis, on supplier enrollment in high-fraud areas.

According to the Report, CMS believes that it has already addressed the majority of the recommendations that also appear in the Report entitled South Florida Suppliers' Compliance With Medicare Standards: Results From Unannounced Visits.

OIG Issues Advisory Opinion on Disease Screening Kiosks in Physicians Offices

On February 22, 2008, the Department of Health and Human Services' Office of Inspector General (OIG) posted OIG Advisory Opinion No. 08-05 (Advisory Opinion).

In the Advisory Opinion, a company that develops, manufacturers and markets pharmaceuticals (Company) for a number of diseases and conditions, including 4 disease states (Disease States), inquired about a proposal to place electronic kiosks, which offer patients free Disease State screening questionnaires, in physicians' offices (Proposed Arrangement). 

Specifically, the Company inquired whether the Proposed Arrangement would violate the Federal anti-kickback statute or the prohibition against beneficiary inducements and result in the imposition of related sanctions. Based on the facts presented, the OIG concluded that the Proposed Arrangement would not violate the Federal anti-kickback statute or the prohibition against beneficiary inducements.

Under the Proposed Arrangement, the Company would place freestanding kiosks, which offer interactive questionnaires about the Disease States, in the waiting rooms of physicians. Use of the kiosks would be voluntary. The kiosks would generate a printout containing the screening questions and the patient's responses. The printouts would not provide any conclusions regarding whether a patient has a particular condition or requires a particular therapy, but would advise patients to talk to their physician about the screening results.  According to the Company, the kiosks would help patients determine whether they should discuss symptoms of the Disease States with a physician.

Furthermore, the Company would offer to place the kiosks in the writing room of physicians whom the Company expects would treat a large number of patients with the Disease States, including Federal health care program beneficiaries.  However, the physicians would not be required to prescribe the Company's drugs in return for the kiosks. The physicians would also neither pay the Company, nor receive payment from the Company, for hosting the kiosks. The physicians could have the kiosks removed at any time.

Moreover, the questionnaires would not mention the Company's drug products or contain any advertisements or incentives for using the kiosks. However, the kiosks would carry a small image of the Company's logo with wording similar to "brought to you by [Company]" and a footer on the printouts that would display the Company's logo and a copyright notice.  The Company would obtain the aggregate data from the kiosks, but no individual identifying data.

The OIG examined the Proposed Arrangement under 2 possible kickback scenarios. However, after examining both scenarios, the OIG found that the Proposed Arrangement would not generate prohibited remuneration under the Federal anti-kickback statute. 

First, the OIG considered whether there would be a potential kickback from the Company to the patient users of the kiosks to induce them to self-refer to the Company's drugs.  Since the kiosks would only provide a printout reprising the questionnaire and each patient's answers and not offer incentives for using the kiosks, the OIG found that the Proposed Arrangement would not provide anything of value to the patients and not implicate the Federal anti-kickback statute.  However, the OIG noted that its conclusion would most likely be different if the kiosks were used to communicate offers of remuneration to patients (e.g., coupons, gifts or services).

Second, the OIG considered whether there would be a potential kickback from the Company to the participating physicians to induce them to prescribe the Company's drugs.  However, the OIG found that the kiosks would "amount to little more than high-tech interactive brochures" and have no independent value to the physicians. The OIG pointed out that the kiosks would remain the property of the Company, physicians would not receive any space rental, utilities fees or other compensation, and found that the kiosks would not influence prospective patients to select a particular physician.

For the same reasons that the Proposed Arrangement would not generate prohibited remuneration under the Federal anti-kickback statute, the OIG concluded that the Proposed Arrangement would not violate the prohibition against beneficiary inducements.

HHS Releases Health Care Fraud and Abuse Control Program Annual Report for 2006

On February 12, 2008, the Department of Health and Human Services (HHS) and Department of Justice (DOJ) released the Health Care Fraud and Abuse Control Program Annual Report for FY 2006 (Annual Report). 

According to the Annual Report, the Federal government won or negotiated approximately $2.2 billion in judgments and settlements, and attained additional administrative impositions, in health care fraud cases and proceedings during fiscal year (FY) 2006.  During FY 2006, the Medicare Trust Fund also received transfers of approximately $1.5 billion as a result of these efforts (and those of preceding years).  Further, the Annual Report indicates that during FY 2006:

• U.S. Attorneys' Offices opened 836 new criminal health care fraud investigations involving 1,448 potential defendants
• Federal prosecutors had 1,677 health care fraud criminal investigations pending, involving 2,713 potential defendants, and filed criminal charges in 355 cases involving 579 defendants
• a total of 547 defendants were convicted for health care fraud related crimes
• DOJ opened 915 new civil health care fraud investigations and had 2,016 civil health care fraud investigations pending

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) established the national Health Care Fraud and Abuse Control Program (HCFAC).  Under the joint direction of the Attorney General and HHS (acting through HHS' Office of Inspector General), the HCFAC program is designed to coordinate Federal, State and local law enforcement activities concerning health care fraud and abuse.  HIPAA requires that HHS and DOJ detail the amounts deposited and appropriated to the Medicare Trust Fund and the source of such deposits in the Annual Report.

Senators Introduce Medicare Fraud Prevention Act of 2008

On February 6, 2008, Senators Mel Martinez and John Cornyn, and several other Senators, introduced the Medicare Fraud Prevention Act of 2008 (S. 2603). 

If enacted, the Medicare Fraud Prevention Act of 2008 (Act) would double the civil monetary penalties associated with improperly filed claims and payments to induce the reduction or limitation of services. The Act would also quadruple certain criminal fines, including the criminal fines associated with false statements and violations of the Federal anti-kickback provisions.  In addition, the Act would increase the maximum criminal sentence for certain violations. For example, the Act would increase the Federal anti-kickback provision's maximum criminal sentence from 5 to 10 years.

The Act would also amend the Federal statutory provisions establishing a $50,000 surety bond requirement for suppliers of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS).  The Act would increase that surety bond amount to $500,000.  On August 1, 2007, the Centers for Medicare & Medicaid Services (CMS) published a Proposed Rule that would require DMEPOS suppliers to obtain and furnish a surety bond to the National Supplier Clearinghouse in the amount of at least $65,000. In the Proposed Rule, CMS arrived at the $65,000 surety bond amount by adjusting the $50,000 statutory surety bond amount by the Consumer Price Index.

The Medicare Fraud Prevention Act of 2008 (S. 2603) has been referred to the Senate Finance Committee.

OIG Issues Advisory Opinion on Hospital Prompt Pay Discounts

On February 8, 2008, the Department of Health and Human Services' Office of Inspector General (OIG) released OIG Advisory Opinion No. 08-03 (Advisory Opinion).

In the Advisory Opinion, a health care system (Health System), that owns and operates 2 acute care hospitals and 1 critical access hospital, inquired whether providing prompt pay discounts to Federal health care program beneficiaries and other insured patients (Proposed Arrangement) would violate the Federal anti-kickback statute or the prohibition against beneficiary inducements. Based on the facts presented, the OIG concluded that the Proposed Arrangement:

• could generate prohibited remuneration under the Federal anti-kickback statute (if the requisite intent were present) but that the OIG would not impose related sanctions; and
• would not constitute grounds for sanctions associated with the prohibition against beneficiary inducements.

Under the Proposed Arrangement, the Health System would offer a discount to Federal health care program beneficiaries and other insured patients for the prompt payment of their cost-sharing amounts and amounts owed for non-covered services for which the patients received an advanced beneficiary notice (Prompt Pay Discount).  The discount would serve to reduce accounts receivable and the costs of debt collection and boost cash flow. 

Furthermore, the Prompt Pay Discount would be offered with inpatient and outpatient services and offered to insured patients regardless of their financial status or ability to pay.  Specifically, the Prompt Pay Discount would be awarded according to the following schedule:

• Percentage of Bill Discounted on Payments Made Prior to Discharge
  • Balances $0 - $999= 10%
  • Balances > $999= 15%
• Percentage of Bill Discounted on Payments Made Post-Discharge But Within 30 Days of Discount Offer
  • Balances $0 - $999= 5%
  • Balances > $999= 10%

Moreover, the Health System certified that the discount would bear a reasonable relationship to the collection costs avoided and that the Prompt Pay Discount would not be publicly advertised.  Instead, the Health System would only notify patients about the discount at certain times during the ordinary course of dealing with patients (e.g., when a patient registers for outpatient services and pays a cost-sharing amount).

With respect to hospital inpatient services, the OIG found that the Proposed Arrangement satisfied the Federal anti-kickback safe harbor for waivers of beneficiary coinsurance and deductible amounts.  In fact, the Health System certified that it would adhere to all of the conditions of that safe harbor, including:

• not claiming the waived amount as bad debt or otherwise shifting the burden to the Medicare or Medicaid programs or other third party payers;
• making the waiver without regard to the patient's reason for admission, length of stay or diagnostic related group; and
• the waiver not being part of a price reduction agreement with a third party payer.

Because there is no similar Federal anti-kickback safe harbor for outpatient services, the OIG had to evaluate outpatient services separately.  In doing so, the OIG considered whether the Prompt Pay Discount may be a disguised payment for referrals. However, the OIG found a number of facts suggesting that the Prompt Pay Discount would be a legitimate prompt payment incentive and not a means to induce patients to self-refer, including:

• the Health System would not advertise the discount opportunity and patients would be informed about the discount availability during the course of the actual billing process;
• third party payers would be notified about the prompt payment policies;
• all of the costs of the arrangement would be borne by the Health System; and
• the discount would bear a reasonable relationship to the avoided collection costs.

Based on the totality of the facts and circumstances, the OIG concluded that it would not subject the Health System to sanctions associated with the Federal anti-kickback statute.  For the same reasons, the OIG concluded that it would not subject the Health System to sanctions associated with the prohibition against beneficiary inducements.

CMS Adds Stark FAQs to CMS Website

The Centers for Medicare & Medicaid Services (CMS) recently added a Frequently Asked Questions (FAQ) page, including 12 FAQs regarding the Stark physician self-referral rules, to the CMS website. 

Urology Groups Challenge Revised Anti-Markup Rule

On January 24, 2008, a laboratory management company and 3 physician urology groups filed a Complaint for Declaratory and Injunctive Relief (Complaint) in the U.S. District Court for the District of Columbia.

The Complaint seeks to enjoin the Department of Health and Human Services and Centers for Medicare & Medicaid Services (CMS) from applying the revised anti-markup provisions to anatomic pathology diagnostic testing services furnished in a "centralized building" that is not the "same building" under the Stark law definitions. The Complaint also seeks an order that would delay the application of the revised anti-markup provisions to anatomic pathology diagnostic testing services until January 1, 2009.

In the Medicare Physician Fee Schedule Final Rule for 2008 (MPFS Final Rule), CMS revised the anti-markup provisions of 42 C.F.R. 414.50 to provide that, if a physician/physician group bills for the technical component (TC) or professional component (PC) of a diagnostic test ordered by the physician and the test is performed at a site other than the "office of the billing physician or other supplier," the payment for the TC or PC may not exceed the lowest of the following amounts:

• the performing supplier's net charge to the billing physician or other supplier;
• the billing physician or other supplier's actual charge; or
• the fee schedule amount for the test that would be allowed if the performing supplier billed directly.

The MPFS Final Rule defines "office of the billing physician or other supplier" as the medical office space where the physician or other supplier regularly furnishes patient care.  With respect to a physician organization, the MPFS Final Rule defines "office of the billing physician or other supplier" as the space in which the physician organization provides substantially the full range of patient care services that the physician organization provides generally.

However, after publishing the MPFS Final Rule, CMS reported that the definition of "office of the billing physician or supplier" may not be entirely clear and that it may have unintended consequences.  Therefore, CMS published a Final Rule in the Federal Register on January 3, 2008 delaying the applicability of the anti-markup provisions until January 1, 2009. However, CMS did not apply the delay to anatomic pathology diagnostic testing services furnished in a "centralized building" that is not the "same building." 

According to the Complaint, the revised anti-markup provisions will prohibit the plaintiffs from billing for the MPFS amount and require that the plaintiffs bill at an actual loss.  Among other things, the plaintiffs also assert that the Final Rule (effectuating the delay) contravenes the notice and comment requirements of the Administrative Procedure Act and that the revised anti-markup provisions are contrary to the Stark law and contrary to and without authority under the MPFS statute.  For more information see Atlantic Urological Associates, P.A. et al. v. Leavitt, Case No. 1:08-cv-00141-RMC.