PPACA Expands Medicare/Medicaid Suspension Authority
November 11, 2010
Posted by Beth Christian
One of the most draconian weapons that can be utilized by the Medicare and Medicaid programs is the suspension of payment remedy. Typically, most Medicare and Medicaid claims are submitted for payment by a provider or supplier and are paid, subject to later post-payment review. Existing regulatory authority allows the Secretary of Health and Human Services (“HHS”) to place a provider on prepayment claims review, or to impose a suspension of payment in certain circumstances. Section 6402(a) of the Patient Protection and Affordable Care Act (“PPACA”) has expanded the Secretary’s authority with regard to the circumstances under which suspension of payment may be initiated. Proposed rules implementing these provisions were published in the Federal Register on September 23, 2010.
Pursuant to 42 C.F.R. §405.370, a “suspension of payment” is defined as the withholding of payment by a Medicare contractor from a provider or supplier of an approved Medicare payment amount before a determination of the amount of the overpayment that exists, or until the resolution of an investigation or a credible allegation of fraud. Historically, both the Medicare and Medicaid regulations have authorized the Secretary of HHS or the state Medicaid agency to suspend payments to providers in cases where a provider has incurred an overpayment or in cases of suspected fraud.
The proposed regulations (set forth at 42 C.F.R. §405.370, et seq. and 42 C.F.R. §455.2, et seq. incorporate a new definition which allows the Secretary or the state Medicaid agency to suspend payments in cases where there is a credible allegation of fraud against a provider. The proposed regulations define the term “credible allegation of fraud” as an allegation from any source, including, but not limited to the following: (1) a fraud hotline complaint; (2) claims data mining; or (3) patterns identified through provider audits, civil false claims cases and law enforcement investigations. Allegations are considered to be credible when they have indicia of reliability. Significantly, the proposed regulations do not contain a definition of the term “indicia of reliability”. The proposed regulations provide that an investigation of credible allegations of fraud will be considered resolved when legal action is terminated by settlement, judgment or dismissal, or when the case is closed or dropped because of insufficient evidence to support the allegations of fraud.
In certain circumstances, the Secretary or the state Medicaid agency may elect not to suspend payments if good cause exists. Good cause is defined as: (1) a situation where the Office of Inspector General (“OIG”) or other law enforcement agency has specifically requested that a payment suspension not be imposed because such a payment suspension may compromise or jeopardize an investigation; (2) it is determined that beneficiary access to items or services would be jeopardized by a payment suspension in whole or in part so as to cause a danger to life or health; (3) it is determined that other available remedies implemented by CMS or a Medicare contractor will more effectively or quickly protect Medicare funds without implementing a payment suspension; or (4) CMS determines that a payment suspension or a continuance of a payment suspension is not in the best interests of the Medicare program.
The “good cause” exceptions for Medicaid are slightly different. In addition to the “law enforcement,” “other available remedies,” and “best interests” exceptions referenced above, good cause for not implementing a Medicaid suspension of payment can also exist if (1) an individual or entity is the sole community physician or the sole source of essential specialized services in a community; or (2) the individual or entity serves a large number of recipients within a Health Resources and Services Administration designated medically underserved area. In addition, a Medicaid suspension will not be imposed if law enforcement declines to certify that a matter continues to be under investigation.
For Medicaid only, suspension of payment may be imposed only in part if: (1) a full suspension would jeopardize recipient access to items or services under the circumstances referenced above; (2) the state determines that payment suspension only in part is in the best interests of the Medicaid program; (3) the credible allegation focuses solely and definitively on only a specific type of claim that arises from only a specific business unit of a provider; or (4) the state determines and documents in writing that a payment suspension in part would effectively ensure that potentially fraudulent claims were not continuing to be paid.
A decision to suspend Medicare payments will be reviewed by CMS every 180 days. The regulations provide that CMS will request that the OIG or other law enforcement agency provide a certification regarding whether or not they are continuing to investigate the matter. While CMS indicated that it will actively evaluate the process of any investigation to determine whether or not the suspension should continue, CMS did not include a limitation on the number of months that a suspension may be in effect. However, the proposed regulations do specify that all suspensions of payment will be temporary and will not continue after the resolution of an investigation unless a suspension is warranted because of reliable evidence of an overpayment or that payments to be made may not be correct.
With regard to Medicaid, the proposed regulations state that all suspension of payment actions will be temporary and will not continue after either of the following: (1) the state agency or the prosecuting authorities determine that there is insufficient evidence of fraud by the provider; or (2) legal proceedings related to the provider’s alleged fraud are complete.
Of course, the notion that any Medicare or Medicaid suspension actions will be “temporary” will provide scant comfort to providers or suppliers who are the subject of a suspension action. Our experience in working with providers who become the subject of suspension of payment actions have shown that more often than not, a suspension of payment will operate as a death knell for the provider or supplier’s continuation of their business, since such a suspension will have an immediate and often drastic impact on a provider’s cash flow. In addition, it has been our experience that healthcare fraud investigations often take a protracted period of time, making the “temporary” nature of the suspension even more illusory.
Medicare Part B Physician Payment Reduction Alert
November 4, 2010
Posted by Frank Ciesla
CMS posted on November 2nd the 2011 Medicare payment rules that apply to, among others, physician services. This rule provides that without Congressional action, Medicare Part B physician payments will be slashed 23% beginning December 1st, with an additional 2% reduction scheduled as of January 1, 2011.
In light of the election, the issue is whether or not this payment reduction will be addressed before November 30th by the lame duck Congress. If addressed, will Congress just kick the can down the road for a couple of months, or for a couple of years until after the next election, or will Congress adopt a permanent solution? If Congress kicks the can down the road for a couple of months, then the issue will need to be addressed again by the new Congress.
The payment reduction will, if implemented, adversely impact both Medicare beneficiaries and providers. If Congress determines not to address the reduction in physician payments, it is very likely that the Medicare population will no longer be treated by physicians in their offices, as is already the case for much of the Medicaid population in New Jersey. This very large population will have to seek physician services in hospital clinics, FQHC’s or hospital emergency rooms. However, if Congress does defer or eliminate the decrease in physician payments, it will necessitate an increase in the premiums paid for Part B by certain Medicare beneficiaries, as well as the portion of the cost of Part B services to the Medicare beneficiaries, which will need to be paid out of the general revenue.
If payments are not adjusted, hospitals, physician practices and other Medicare providers and suppliers who are taking assignment in exchange for paying physician employees a salary will see the reduction in their revenue stream in cases where services are being provided to Medicare patients. This has an impact on the viability of the employer, as well as its ability to pay its employees, its bank loans and its expenses. There is clearly the possibility that some medical practices, providers and suppliers impacted by the payment cuts will no longer be viable if the payment cuts are allowed to remain in place.
Health Insurance Premiums
October 27, 2010
Posted by Frank Ciesla
An issue which confronts providers, employers and beneficiaries alike, and was a major driver in the federal health care legislation, is the affordability of small business and individual health care policies. It is clear that a family making $50,000 to $75,000 a year finds it difficult, and in some instances impossible, to afford family coverage that may run between $12,000 and $15,000 for a non-luxury policy.
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The Patient Protection and Affordable Care Act (“PPACA”) currently takes a traditional approach to influencing the cost of health care premiums. This approach is set forth in the provision of PPACA requiring that either 80 cents or 85 cents of each premium dollar be used for the patient’s health care needs, thereby limiting those funds available to the insurer for profit and administrative overhead.
The PPACA also limits the level of health care premiums to those which are reasonable. Senator Diane Feinstein (with co-sponsors) believes that this language is too broad and has introduced a senate bill (Senate Bill S3078), which would amend PPACA to provide much greater governmental control as to the premiums that insurance companies can charge. The effect of the legislation would be to impose a ceiling on premiums, not based on the costs incurred by the insurance company in providing the benefits, but based upon what people can afford to pay. This approach is partially accomplished under the federal health care program with the various insurance subsidies that are being provided.
However, if one were to look at for instance the State of Massachusetts which has attempted to establish “Universal Healthcare,” one sees a very disturbing situation. In that State, the Executive Branch turned down all rate requests, which action was upheld by the Judicial Branch, and the matters have been submitted for administrative hearings. Subsequently lower premiums were approved within the administrative process. In addition, the Executive Branch commenced a process and the Legislature has introduced legislation consistent with the Executive Branch’s initiative, to have providers contribute to the insurance companies so that the insurance companies can subsidize the premiums charged to the individuals and small businesses.
A determination as to how to judge the reasonableness of the premium, based upon affordability for the individuals or small businesses purchasing the insurance, has to some extent been adopted by the Insurance Commissioner in the State of Maine. The difficulty with this approach is that if the premium is insufficient to cover the costs of health care paid by the insurance company, the insurance companies may become insolvent, which is a major problem for employers, providers and beneficiaries. Indeed, our law firm has already encountered this problem even prior to the implementation of health care reform legislation through our representation of providers in both the HIP of New Jersey insolvency and the New Jersey Car insolvency.
To protect themselves, insurers are likely to attempt to seek reductions in the payments to be made to the providers. At the same time, the costs of operating a medical practice or a health care facility keep growing, while the revenue from providing the services keeps diminishing. A physician needs to pay for malpractice insurance, rent, employees, and supplies, pay loans incurred to obtain a medical education and other expenses, in addition to compensating himself or herself for the professional services rendered. Without adequate coverage of practice expenses and with significant reductions in compensation, physicians may reduce their participation in particular insurance plans or drop out of them entirely, which creates (as it has in Massachusetts and is creating in New Jersey) an access to care problem. Another alternative employed by the payors is to attempt to shift costs from policies being sold to individuals and small businesses over to larger businesses.
Medicare Trust Fund Solvent thru 2029 — Maybe
October 21, 2010
Posted by Frank Ciesla
The Annual Report of the Board of Trustees of the Federal Hospital Insurance and Federal Supplemental Medical Insurance Trust Funds reported that the Medicare Hospital Trust Fund’s solvency has now been extended from 2017 to 2029. On the surface, this is good news for everyone. Medicare, as we are all aware, is the major payor which provides those over 65 with the ability to obtain health care services. It is also good news for the providers, in that Medicare will continue to be a viable payor. However, a deeper analysis is required as to the methodologies employed to reach a determination as to Medicare solvency through 2029. Read more
Medicare/Medicaid Primary Care Payment Increase
October 6, 2010
Posted by Beth Christian
While some physicians have expressed concern regarding the negative effect that health care reform will have on their level of reimbursement, others will soon see an increase in reimbursement from the Medicare program if they fit within the definition of a “primary care practitioner.” Effective January 1, 2011, payments to primary care practitioners will be increased by an amount equal to 10% of the Medicare payment for the service in question. Physicians who have a primary specialty designation of family medicine, internal medicine, geriatric medicine or pediatric medicine for whom primary care services accounted for at least 60% of their allowed charges will be eligible for the 10% increase. Eligibility for the increase has also been extended to nurse practitioners, clinical nurse specialists and physician assistants.
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In order to meet the 60% test for primary care services, the physician must bill at least 60% of their allowed charges utilizing the following HCPCS codes: (i) 99201-99215; (ii) 99304-99340; (iii) 99341-99350. Practitioners who do not fall within this range will not have an avenue for administrative or judicial review of their inclusion in or exclusion from the primary care practitioner category. It is notable that ob/gyn services were not included within the definition of primary care services. While the number of Medicare patients who receive obstetrical services is typically quite low given the nature of the Medicare population, many third party payors categorize ob/gyn physicians as primary care physicians and do not require the patients to obtain a referral from their primary care physician before receiving ob/gyn services.
Certain surgeons may also benefit from a 10% incentive payment, although the category of surgeons that will benefit from these payments is more narrowly defined. Effective January 1, 2011, a physician who practices as a general surgeon in an area designated as a health professional shortage area will also be able to realize a 10% incentive payment. For purposes of eligibility for the incentive payment, the term “general surgeon” means a physician who is designated CMS specialty code 02-general surgery as their primary specialty code when they enrolled in the Medicare program. The incentive payments apply to services that are billed as “major surgical procedures” which are defined as physician services which are surgical procedures for which a 10 day or 90 day global period is used for payment.
Under the CY 2011 Medicare Physician Fee Schedule proposed rules that were issued on June 25, 2010, CMS has proposed that
a practitioner’s eligibility for incentive payments in CY 2011 will be determined using claims data and the provider’s specialty designation from CY 2009. For subsequent years, CMS is proposing to revise the list of primary care practitioners on a yearly basis, based on updated data regarding an individual’s specialty designation and the percentage of allowed charges for primary care services.
In addition, Medicaid payment rates to primary care physicians in the primary specialty designations of family medicine, general internal medicine or pediatric medicine will receive a boost in 2013 and 2014. At that time, the Medicaid payment rates for primary care services will be no less than 100% of Medicare payment rates for such services. The federal government will provide 100% federal funding to the states to enable them to meet this requirement. This may be a temporary boost, as both the increase in payment rates and federal funding expire at the end of 2014. However, even a temporary boost is good news for those primary care physicians who treat Medicaid beneficiaries, as New Jersey’s Medicaid payment rates for physicians have historically been well below the rates paid by Medicare for identical services.
Of course, Congressional action (or inaction) at the end of November may impact the overall reimbursement paid to all physicians under Medicare. The temporary fix for the 21% Medicare physician payment reduction that went into effect earlier this year is due to expire then. It will be interesting to see how a lame duck Congress chooses to address this issue.
PPACA Changes to Fraud and Abuse Laws
September 30, 2010
Posted by Sharlene Hunt
The Patient Protection and Affordable Care Act (PPACA) contains a number of changes that impact the fraud and abuse provisions under the federal Medicare and Medicaid laws. PPACA also provides additional funding to boost enforcement activity by the government, and contains a number of provisions broadening the government’s authority relating to fraud and abuse in the Medicare and Medicaid programs. These changes will undoubtedly result in increased enforcement action under the fraud and abuse laws.
For providers, one of the important provisions contained in PPACA relates to the obligation to report and return overpayments. In May 2009, the Fraud Enforcement and Recovery Act (FERA) was adopted, which revised the False Claims Act to expand the definition of a “claim” to include the retention of an overpayment. Under FERA, a provider who knowingly avoids the obligation to pay money to the government is liable for civil monetary penalties plus treble damages under the False Claims Act. Thus, False Claims Act liability attaches to the retention of an overpayment, or a so-called reverse false claim.
Under PPACA, a healthcare provider now has the obligation to report and return the overpayment by the later of 60 days after the date the overpayment is identified or the date any corresponding cost report is filed (if the provider is required to file cost reports). Further clarification of these provisions may be forthcoming in regulations, such as clarification of when an overpayment is “identified”. However, any provider who determines it has received an overpayment should immediately take action to identify the scope of the overpayment and should commence the process for returning the overpayment. Due to the tight time frame for reporting, having procedures in place to follow before being faced with such a situation will make it easier on all concerned if such an event occurs.
Other changes adopted through PPACA have made it easier for whistleblowers to bring actions on behalf of the federal government, provide for expanded screening and oversight of new providers, and expand the application of civil monetary penalties. PPACA also allows the federal government to exclude a provider for obstructing an investigation, and makes a violation of the antikickback statute an offense under the False Claims Act. Proposed regulations that address expanded screening, moratoria on payments, guidance regarding cross-terminations under Medicare and Medicaid, and requirements for suspension of Medicare and Medicaid payments based on “credible allegations of fraud” were published by CMS on September 23rd.
PPACA further directed the Department of Health and Human Services to issue a self-disclosure protocol under the Stark laws. This latter change is in response to action taken by the Office of the Inspector General in March of 2009, when the OIG indicated it would no longer accept self-disclosures for Stark violations unless they also constituted a violation of the antikickback law. The new self-disclosure protocol for Stark law violations was issued on September 23rd.
Healthcare Reform Brings New IRS Requirements for Tax-Exempt Hospitals
September 21, 2010
Posted by Beth Christian
If your tax-exempt hospital has not yet formed a task force or committee to work on implementing the additional IRS requirements contained in the Patient Protection and Affordable Care Act (the “PPAC’), now would be a good time to do so. The law imposes four additional requirements upon tax-exempt hospitals. Hospitals that fail to meet these requirements will be subject to a $50,000 excise tax. The four additional requirements include (1) the requirement that a hospital conduct community health needs assessments; (2) the implementation of criteria regarding a facility’s financial assistance policies; (3) limitations on a facility’s charges; and (4) implementation of billing and collection restrictions. Read more
Physician Payment Rates
September 7, 2010
Posted by Frank Ciesla
Congress has restored the 21% pay cut in Medicare physician payment rates that recently occurred, but only on a temporary basis.
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Earlier this year, the Medicare program initially withheld payments to physicians for services provided, then halted payments temporarily to all physicians, when Congress failed to enact legislation that would postpone or eliminate the reduction in Medicare payment rates to physicians. Of course, physicians still had to pay the bills and compensate their employees, even without this cash flow. Obviously, a permanent resolution of this issue is critical. If the 21% reduction in Medicare payments to physicians is not permanently resolved, it will have a significant adverse impact upon physician compensation, and may also adversely impact the ability of physicians to continue to even maintain their offices. If this scenario occurs, the physicians will have no alternative but to determine whether or not they can continue to provide services to the Medicare population. Read more
Legislative Goals of Federal Healthcare Reform
August 3, 2010
Posted by Sharlene Hunt
I recently attended the American Health Lawyers Annual Meeting in Seattle. Much of the focus of the Annual Meeting this year was on the federal healthcare reform legislation and its impact on healthcare providers. Over the coming months and years, many of our blog posts will address the healthcare reform legislation, the implementing regulations, and their impact on providers, employers, and consumers of healthcare. One of the programs I attended at the Annual Meeting focused on the essential provisions in the legislation, and it forms a good background for understanding the many and varied provisions in the legislation.
This interesting program spelled out the three primary goals of healthcare reform. It is easy to see how many of the provisions in the healthcare reform legislation are intended to take a step toward accomplishing these goals, although it is obvious that further reform will be necessary before they will be attained. The first goal is to obtain universal coverage for all Americans through shared responsibility. The second goal is to improve the quality of healthcare in this country and to improve the overall public health. The final goal is to lower the costs of healthcare.
There are several provisions in the healthcare reform legislation aimed toward the goal of increasing coverage. Some of these provisions include limiting health insurance coverage waiting periods to 90 days, prohibiting lifetime limits, requiring plans to cover adult children up to age 26, and a prohibition on rescissions of insurance policies. Other legislative provisions geared toward increasing coverage include provisions designed to foster the development of state health insurance exchanges where individuals in small businesses can compare and purchase health insurance, the establishment of high risk pools to provide coverage to individuals with preexisting conditions until the launch of the health insurance exchanges, as well as federal subsidies to be provided to low income Americans to purchase health insurance. Increases in Medicaid program coverage are also supposed to increase coverage to 16 million additional beneficiaries. Read more
A New Era in Healthcare
May 1, 2010
Posted by Frank Ciesla
The recently passed Patient Protection and Affordable Care Act and the Healthcare and Education Record Act of 2010 (hereinafter jointly “PPACA”) will impact employers, employees, their dependents, insurance companies, healthcare providers and state agencies at a minimum. While PPACA consists of over 2,000 pages, the implementation of PPACA will require, by the terms of PPACA itself, an extensive time period, as well as substantial, detailed and controversial regulatory implementation.
In light of the extended implementation time frame, there clearly will be many authors participating in the implementation process. The implementation will undoubtedly be subject to future congressional action. In addition, the composition of the Congress will change significantly through retirements, lost elections, or deaths. What is not clear is the various approaches that may be taken by the future Congresses to issues that present themselves during this implementation stage.
Moreover, whether or not President Obama is re-elected to a second term, portions of the implementation will occur after he has completed his Presidency. Therefore, the potential impact of a change in administration could further alter the implementation landscape. Read more
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