DESPITE LENGTHY BACKLOGS AND BROKEN SYSTEM, POWER OF CMS CONTRACTORS CONTINUES TO GROW

The defective, unchecked authority, and devastating impact on providers is so palpable, it is difficult to comprehend why CMS has chosen to expand the authority and discretion of CMS contractors to deny claims from providers. Effective on March 6, this change affects Medicare administrative contractors (MAC), recovery audit contractors (RAC), and zone program integrity contractors (ZPIC), as all now have greater discretionary authority to deny claims related to other denials stemming from prepayment or post-payment review.  CMS emphasized that related claim denials are possible for other healthcare services. These may include skilled nursing facility care, home healthcare, hospice services and medical equipment rental, the article noted.

A spike in appeal requests may follow automatic denial of related claims, compounding the problem of an already-overloaded Medicare appeals system. The Office of Medicare Hearings and Appeals had a backlog of at lease 350,000 pending beneficiary appeal requests as of January. Efforts to reduce this led the government to announce a long-term suspension of work on provider appeals. This means it simply won’t act on new request for appeal hearings filed by hospitals, physicians, or other providers. CMS blames the sequester and an unprecedented increase in appeal requests. This “unprecedented” increase must be coming from somewhere. It is either due to the massive increase in denial of claims, high success in getting them overturned, or both. CMS expects that the suspension of hearing rights will last about two years. No appeals filed after April 1, 2013 will be assigned to an ALJ. This effectively allows CMS to suspend appeal rights, but the collection efforts continue, interest mounts on debts, and the contractors are immune while those adversely affected are denied due process and arguably other legal rights. This backlog can be devastating for many providers. If a provider has chosen to appeal, it is because the amount is substantial, and for some it can cripple their practice.

This website has a page devoted to RACs, but they are not the only culprits. RACs are responsible for identifying and correcting Medicare overpayments (and supposedly “underpayments” as well). I have yet to meet a provider who received extra money from these contracting companies because they felt he/she was underpaid for the service rendered. About 111 members of Congress wrote a letter to HHS Secretary Kathleen Sebelius, questioning the RAC payment model, citing sobering numbers as to their accuracy and credibility. RACs receive a 9-12% commission on denied claims and are paid without regard to accuracy or the resolution of any appeal of the RAC's findings. This means that even if they get reversed, the RACs keep the money. This is not just a hypothetical. Between 2010-2011, hospitals appealed about 25% of all RAC denials, and of those appealed, 71% of them got reversed. Despite those numbers, these contractors still manage to rake in billions of dollars for CMS every year.

Despite all this, it appears that the government does not think that these contractors are doing enough. The Government Accountability Office (GAO) blamed CMS and its RACs for allowing improper payments to continue. The GAO even recommended that CMS improve its oversight over ZPICs, devoting their work mostly to anti-fraud measures and being given arguably even more authority than RACs and MACs due to their fieldwork. 

It is remarkable that despite the backlogs, the statistics, and the suspension of due process that demonstrate the dysfunction of this relatively new system of curbing claims abuse, their authority, discretion, and earnings continue to grow. It becomes even more difficult to challenge as these “private” companies continue to get rubber stamps from the Federal government.

Government Sets Their Sights on Clinicians with High Medicare Part B Reimbursements

The Office of the Inspector General (OIG) recently released a study detailing overpayments to clinicians who provide Medicare Part B services. "High cumulative payment clinicians" were defined as those who are receiving total annual payments of more than $3 million for Part B services.  This threshold poses a greater risk for improper payment or fraud in the Medicare system. The OIG will seek to implement new programs and policies to detect those problems, and CMS agrees with its essential recommendations. Medicare covers services (like lab tests, surgeries, and doctor visits) and supplies (like wheelchairs and walkers) considered medically necessarry to treat a disease or condition.

Part B covers 2 types of services

• Medically necessary services: Services or supplies that are needed to diagnose or treat your medical condition and that meet accepted standards of medical practice.
• Preventive Services: Health care to prevent illness (like the flu) or detect it at an early stage, when treatment is most likely to work best.www.medicare.gov

The study found that both the number of Medicare Part B clinicians generating high cumulative payments, as well as the total amount of those payments, increased almost 78% from 2008-2011. Most importantly, the study identified 303 clinicians who supplied more than $3 million in Part B services in 2009, with Medicare Administrative Contractors (MACs) identifying 104 of the 303 (34%) for improper payment reviews. Some clinicians faced suspended licenses, mandatory prepayment reviews, and even two indictments. The OIG recommends that CMS establish a cumulative payment threshold above which a clinician's claims would be selected for review as well as implementing a procedure for timely identification and review of clinicians' claims that exceed this threshold. One problem with the threshold is that a violator would tailor their reimbursements strategically to that threshold. On the other hand, high Medicare earnings could be indicators of a bustling and successful practice and not necessarily a red flag as to Medicare fraud. As a result of this study, clinicians who are reimbursed through Medicare Part B should ensure that their billing practices are in compliance with Medicare documentation and reimbursement rules. A copy of the study can be found at: http://oig.hhs.gov/oas/reports/region1/11100511.pdf

Bad Week for Affordable Care Act--Cancellation Notices and Extension on Mandates.

If you like your current healthcare plan....

A selling point that was often repeated by President Obama was "If you like your doctor, you can keep your doctor. Period. If you like your plan, you can keep your plan. Period." While those on both sides of the political aisle discuss whether this was a lie, the fact is many Americans cannot keep their plans, even if they like it. Numbers ranging from hundreds of thousands, to millions of Americans received cancellation notices from their insurance companies. They cannot keep their health plan as it currently stands.

http://www.cbsnews.com/8301-505263_162-57609737/obamacare-more-than-2-million-people-getting-booted-from-existing-health-insurance-plans/

In the State of Michigan alone, approximately 140,000 people have received their notices.

Extension on Employer Mandate

The requirement for employers with over 50 employees to ensure every full-time worker by January 1, 2014 or pay $2,000 per full-time worker (excluding the first 30 employees) is still technically law, but the IRS will refrain from enforcing tax penalties until January 1, 2015. Sources close to the White House, including posts on the White House web page, cite the concerns of businesses as its main reason for the extension. However, it still urges employers to voluntarily comply if they can, and/or use this extended time to prepare. In either case, it gives health care/employment attorneys more time to consult their business clients as their businesses grow.

Extension on Individual Mandate

The individual mandate has been extended to March 31, 2014. The extension only applies to 2014. In 2014, the penalty is $95 per adult and $47.50 per child (up to $285 per family) or 1% of family income, whichever is greater. In 2015, penalty is $325 per adult, and $162.50 per child (up to $975 per family), or 2% of family income, whichever is greater. From 2016 and beyond, penalty is $695 per adult, $347.50 per child (up to $2,085 per family), or 2.5% of family income, whichever is greater. This extension may be very helpful as the individual mandate can prove costly, since it is designed for and will mostly affect young, healthy Americans who have, to this point, chosen not to pay for healthcare that they feel they don't need. Since insurance companies can no longer turn people down due to pre-existing conditions, the individual mandate curbs any incentive for young Americans to wait until they get sick to get coverage. 

The changes listed above may be tentative, but extensions may be recurring if the ACA continues to run into roadblocks like those experienced this week.    

THIS PAST WEEK IN LEGAL HEALTHCARE NEWS—May 20, 2013

The OIG published its latest special advisory bulletin on the effect of exclusion from participation in Federal health care programs. Revenue generated from billing state and federally funded health programs remains a significant portion for healthcare providers and suppliers and in many cases, the lifeline of an institution or practice. For individual doctors, exclusion from the program means more than having to shut down a practice, like it would for a hospital or a group practice. For an individual physician, exclusion can render that doctor unemployable, even if the scope of that exclusion is relatively narrow. Employers don’t want the liability, and potential employees are scarred by the screening process that could expose them as being on the OIG List of Excluded Individuals and Entities (LEIE). For a full report of the bulletin, click the link below.

http://oig.hhs.gov/exclusions/files/sab-05092013.pdf

A Detroit-area adult day care center owner was sentenced to serve 40 months in prison for billing for unnecessary psychotherapy services, or services that were not provided, as part of a health care fraud conspiracy which led to more than $19 million in fraudulent Medicare billings. In addition to the prison term, the sentence included 2 years of supervised release, and about $600,000 in restitution. It was investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.

To learn more about the specifics of this bust, click the link below.

http://www.justice.gov/opa/pr/2013/May/13-crm-544.html

A Detroit-area home health care agency owner was sentenced to 60 months in prison for causing the submission of over $1 million in false and fraudulent billing to Medicare as part of a $13.8 million health care fraud conspiracy. The agency paid and directed the payment of sums to doctors to refer patients for home health care services that were not medically necessary and/or never rendered. Multiple entities and providers were involved. The scheme goes further, as the owner paid and directed the payment of various medical professionals, including nurses, physical therapists, and physical therapy assistants, to create fictitious patient files to document home health services purportedly provided, that were never rendered.  Fictitious patient files were signed, purporting to have given physical therapy services at all three home health care agencies that were in fact never rendered.

For more information on the sentencing, click the link below.

http://www.justice.gov/opa/pr/2013/May/13-crm-548.html

Since their inception in March 2007, strike force operations in nine locations have charged more than 1,480 defendants who collectively have falsely billed the Medicare program for more than $4.8 billion.  In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov

Medicare fraud is very real, and government agencies and investigators are careful and patient when making their apprehensions. It is very easy to be lured into becoming a co-defendant without knowing the full extent of what business plan you are being asked to take part. You could be a victim/co-defendant simply through a referral process that, unbeknownst to you, could be a serious violation.

We offer counseling on ways to help your business flourish legally and ways to avoid engaging in any unlawful proposed arrangements. 

Contract Basics from ICLE Seminar by Scott Scarbrough

Contract Basics A to Z

With the wealth of information available on the internet, there are numerous standard contract forms that can be downloaded and filled in with the details of a particular agreement.  There are forms for the sale of property, rental of property, lease of property, or a license for the use of software, and even experienced attorneys often take these forms and simply edit, cut and paste to fit a particular situation at hand   In fact, so many contracts are created from stock contract forms with boilerplate clauses that not only may one or both parties not understand what they are actually agreeing to, but the lawyer who drafted the contract might not realize the ramifications of some components of the contract. 

While stock contract forms are an excellent time saving tool, it is important to understand the implications of each and every term in a contract.  This blog will take on the common steps of contract drafting; discuss the importance of each section, the traditions, assumptions, benefits and risks of boilerplate clauses, and implications of these elements of the written contract.    

This, the first column of this blog series will explore the basics of a contract; the importance of the client interview, ethics, communications, and the engagement letter.  Following weeks will explore the most common components of a written contract, the preamble, recitals, words of agreement, definitions, covenants, conditions, representations, warrantees, boilerplate clauses, end games, remedies, and ADR clauses.

The Initial Client Interview:

A client meets with the attorney to engage the attorney in drafting a contract.  What are the primary issues the attorney should be considering in this first interview?  Are there any conflict of interest issues with helping this client?  What other questions should he/she be asking the client?  Fortunately, the answers come from ethic laws that bind all us attorneys and from common sense in considering what the attorney is being asked to do in drafting the contract.

On the ethics front, the number one complaint filed against attorneys with the bar association is for lack of communications with the client, followed closely by claims of unreasonable fees.  The easiest way to insure your client’s satisfaction is to manage their expectations for communication and to explain in detail the fee structure during the initial client interview.  By following up writing, in an engagement letter to the client, the attorney not only insures the client understands the fees and communication expectations are documented, but the attorney satisfies Wisconsin’s Rules of Professional Conduct for Attorneys.  (WI 20 SCR 1.5 expressly mandates that an attorney prepares an engagement letter confirming, in writing, the nature and scope of the representation, if the fees will exceed $1000.)

[Practice Tip:  The engagement letter should be provided to the client within a reasonable time. The detail and specificity of the letter depends on the nature of the client-lawyer relationship, the work to be performed, and the basis and rate of the fee.  Additionally, a lawyer should detail in writing, before or within a reasonable time after commencing the representation, the basis or rate of the fees and expenses to be charged to the client.]

            On the contract drafting front; what are the specifics of the contract that the client wishes the attorney to draft?  In order to ask the right questions, an attorney needs to understand what is in a contract.  Remember, there are two basic components/requirements of a contract; 1.  A promise or a set of promises (a commitment to do/not do something) that the law will enforce (a court will award a remedy for the failure to perform), and 2.  Contains an Offer, Acceptance, and Consideration, plus all the other equally important elements of: how, when, where, why, and what if.

           

            In future weeks, this blog will discuss the common components of a contract, in order to understand the how, when, why, and what if.  Next week we will tackle the traditional Preamble, Recitals, and Words of Agreement.  Following weeks will review the Definitions, Covenants and Conditions, Representations and Warrantees (which are frequently misunderstood and mis-used), Endgames and Remedies, and then finally end with a series of blogs concerning the benefits and cautions of Boilerplate clauses.

Input is always appreciated.  If there are any questions, comments, insights, concerns with this blog, please contact, J. Scott Scarbrough, Esq. at JScottScarbrough@MidwestLegalPartners.com.

  Published by J. Scott Scarbrough

Department of Health and Human Services (HHS) under greater fire from American Hospital Association (AHA), hospitals, and other entities for RAC audits

          On November 1, 2012, the AHA, along with four hospitals (collectively the “Plaintiffs”), filed a lawsuit against HHS in the U.S. District Court for the District of Columbia. The lawsuit, which names as the defendant Kathleen Sebelius in her official capacity as the Secretary of HHS, alleges that the Medicare program, through the Center for  Medicare and Medicaid Services (CMS) has engaged in an unlawful government practice in its refusal to reimburse hospitals for reasonable and medically necessary services. This includes full Part B reimbursement where a Part A inpatient admission is denied by a Recovery Audit Contractor because the inpatient services were provided in the wrong setting, i.e. the services should have been provided in an outpatient setting.

RAC Audits, and particularly CMS' decision to deny payment altogether when it deems that inpatient criteria has not been met, have been a source of great uncertainty for hospital patient care and financial planning ever since the RAC Demonstration Project was implemented in 2005. Visit the Midwest Legal Partners page on RAC and the audit program by clicking here. The lawsuit cites four cases - one from each hospital involved in the lawsuit - where CMS did not dispute that outpatient payment was appropriate, yet continued to deny all reimbursement through several levels of appeal. Despite at least four decisions by the Medicare Department Appeals Board Medicare Appeals Council ("MAC") - the final agency decision-maker - holding that payment for Part B services was appropriate, CMS continues to deny Part B payment after a denial of reimbursement for Part A-billed services, citing as its Payment Denial Policy (Medicare Benefit Policy Manual ("BPM") Chapter 6 § 10) as its only justification. Notably, that provision of the BPM was promulgated without notice and rulemaking, and with no accompanying explanation.

To obtain an ALJ order for full Part B reimbursement, a hospital must proceed through the onerous Medicare appeals process. This 5-step process is also outlined in our RAC page. This is why the lawsuit recently filed by the AHA is an important step towards challenging the core of CMS's policy that hospitals are not entitled to full Part B reimbursement where an impatient admission is denied because the services were provided in the wrong setting.

The lawsuit filed by the AHA alleges that CMS's Payment Denial Policy violates requirements of the Federal Administrative Procedures Act as well as the requirement in the Medicare Act to pay for medically necessary hospital services. The complaint outlines CMS's refusal to provide hospitals with full Part B reimbursement and the effect CMS' refusal has on hospitals and patient care. "CMS simply refuses to pay hospitals for services that it acknowledges are covered under Medicare Part B and that it acknowledges were reasonable and necessary in the particular case." The complaint continues, "both the uncertainty and the actual loss of Medicare funds ultimately may adversely affect patient care." Furthermore, AHA's complaint also accurately explains the uncertainty of CMS's exact justification for its "Payment Denial Policy."

The aggressiveness of RAC audits, the uncertainty of appropriate reimbursement, CMS's failure to articulate a justification for its policy, and the effect on patient care when hospitals do not receive accurate payment, all underscore the importance of the concentrated efforts to obtain full Part B reimbursement for hospitals. AHA's complaint is an important step towards highlighting the broad implications of CMS "Payment Denial Policy" and, hopefully, obtaining a long-term solution for hospitals and Medicare beneficiaries.

The complaint can be read online at:

www.aha.org/content/12/121101-aha-hhs-medicare-com.pdf

It should also be noted that this complaint was filed just days after AHA sent a letter to the Office of Inspector General (OIG) Daniel Levinson on October 24, 2012 urging reform of RACs.

For one, the AHA urges that more provider education is needed to improve the rates of payment errors. According to the RACTrac survey, more than half of the respondents indicated that they have received no education from CMS on avoiding payment errors. The letter stresses that program integrity could be strengthened with provider education, and that such errors would be reduced.

According to the AHA's RACTrac survey data, 75% of appealed RAC denials are reversed. The AHA asserts that because the RACs are paid on a contingency fee basis, there is a strong financial incentive to deny more claims and increase contingency payments. While this is hardly old news and has often been the case, there was less empirical data at the beginning of this program to justify such a claim. The implication is that RACs are not monitored effectively and are thus allowed to inappropriately deny claims to increase contingency payments. Some parts of the letter were more explicit than implicit in this allegation. "Denying payment for an entire inpatient stay is far more lucrative for the contractors than identifying an incorrect payment amount or an unnecessary medical service." This letter, along with the most recent complaint, as well as the legislation recently proposed on reforming the RAC program, are the latest developments adding increased pressure on the government and its hired auditors in the implementation of this program. 

This Month In Healthcare Legal News--Part 2: October Review

As the month of October draws to a close, the news cycle has been dominated by Hurricane Sandy and the upcoming election. Healthcare law in the United States and its future have also seen some developments but the public has not been made aware of them to a great extent. One example is the OIG Work Plan discussed in the previous blog. Another is proposed legislation that could affect a serious component of healthcare law for many practitioners. 

Any director or officer of a hospital system or primary care doctor with his/her own practice will tell you--without Medicare reimbursements, your overall reimbursement will be low regardless of the diversity of your payer mix. It is a chance many won't take. One bad audit can set a company back for months despite the outcome of the appeals process.

PROPOSED MEDICARE AUDIT IMPROVEMENT ACT AUDITS THE AUDITORS.

The healthcare law section of our practice group area delves into Recovery Audit Contractors (RAC) and their impact on Medicare reimbursements to providers as well as the success they have had in bringing money back into the federal program. Recently, a bill was introduced to Congress which regulates RACs and forces them to operate with more regulation than when they were initially implemented. With the need before to recover overpayments of Medicare being so desperate, companies were allowed broad authority to collect while making the provider jump through many hoops and appeals to get it back. Furthermore, RACs were incentivized to do so by getting a percentage of what they retrieve.

Representatives Sam Graves (R-MO), Todd Akin (R-MO), Billy Long (R-MO), and Adam Schiff (D-CA) introduced a bill to Congress on October 16, 2012 which proposes to reduce the Medicare contractor audit burden on hospitals. The bill, called the Medicare Audit Improvement Act of 2012 (Act), proposes changes to the ways contractors may conduct audits and imposes additional requirements on contractors.

Among the requirements introduced in the Act are limits to the amount of additional documentation a Medicare contractor may request for complex pre-payment audits and complex post-payment audits. The Act also proposes penalties for contractors that fail to maintain compliance with Medicare program requirements. Specifically, the Act calls for financial penalties when a contractor fails to complete an audit determination within the applicable timeframes, and when a contractor fails to provide communication in a timely manner regarding claim denials and appeals. This is very important for providers who are constantly given the run around or left in limbo wondering about why they haven’t been reimbursed yet for services and when CMS plans to release their Medicare payments. Perhaps the biggest measure of reform in the Act includes provisions that propose to impose financial penalties for appeals that are overturned. When a party successfully appeals a claim denial, the Act would require the contractor to pay a monetary penalty to the party that prevailed in the appeal. This aspect of the Act is notable given the number of claim denials, particularly in the area of short-stay inpatient admissions, that are overturned at the ALJ level of appeal.

Contractors would also be required to publish performance data under the Act. Contractors would be required to publish data each year on:

• the aggregate number of audits conducted,

• the aggregate number of denials for each audit type,

• denial rates,

• the aggregate number of appeals filed by providers,

• the aggregate rate of appeals, and

• the appeal outcomes at each stage of appeal.

The proposed legislation could be read by clicking the following:

http://www.gpo.gov/fdsys/pkg/BILLS-112hr6575ih/pdf/BILLS-112hr6575ih.pdf

We do not want to speculate as to the likelihood that it will pass, especially with a pending election. However, we do have to note that this would greatly reform the current RAC system and would require broad bipartisan support before passing through both houses and being signed by the President. Opponents of the proposed legislation may argue that the bill, especially with provisions providing penalties for overturned appeals, may severely hinder or effectively do away with companies and their abilities to audit. Even if the bill passes, certain provisions such as those will likely be removed or modified before the bill becomes law. Midwest Legal Partners will continue to track this proposed legislation. 

Overall, the entire month of October has been an exciting time for Midwest Legal Partners, PLLC. Saif Kasmikha was a speaker with a comprehensive panel at a health law event in Michigan on the impact of the Affordable Care Act on all stakeholders. Scott Scarbrough was also a speaker at a CLE event in Milwaukee, Wisconsin on business and IP matters. We will continue to keep our clients and the public posted on the latest legal news affecting their practices.