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Health Law Alert
Spring 2006
From the Chair
The major development since our last Health Law Alert is the effective date of the Medicare Part D drug program. This program holds great promise for millions of Americans. At the same time, it presents significant challenges for various components of the health care delivery system, as well as for Medicare beneficiaries themselves. Substantial confusion existed prior to January 1st and continues to exist to date, relating to the decisions which must be made by each Medicare beneficiary. Although dual-eligible beneficiaries in long term care facilities have been assigned to PDPs, the decision making process for others has been difficult. In fact, I personally struggled in determining which PDP was most appropriate for my father and my mother-in-law. Each has different health care needs and each lives in a different state. The process has been completed, although it was not pleasant and it was not easy.
Click to continue...New Law Creates National Patient Safety Database
By: Steven R. Smith and Chiarra-May E. Stratton*
The Patient Safety and Quality Improvement Act of 2005 (the Act), was signed into law on July 29, 2005, providing for the improvement of patient safety and the reduction of the incidence of events that adversely affect patient safety. Patient Safety and Quality Improvement Act of 2005, Pub. L. 109-41, 119 Stat. 424. To that end, the Act creates a national database on medical errors, designates individual reports as confidential, and shields participating providers from liability. The Agency for Healthcare Research and Quality (AHRQ) will implement the Act, because the Act amends the sections of the Public Health Service Act for which AHRQ is responsible. It will be the AHRQ, therefore, that will promulgate the regulations under the Act.
Click to continue...OIG Focus: Part D, Nursing Homes and CMS
The OIG publishes a Work Plan on an annual basis to provide a broad description of issues and concerns it plans to review during its upcoming fiscal year. The issues identified in the OIG's Work Plan for fiscal year 2006 (2006 Work Plan) represent areas that the OIG perceives are critical to the OIG's mission. The OIG's stated objective is to focus on projects that identify vulnerabilities in HHS programs. Overall, the Work Plan seeks to promote the economy, efficiency, and effectiveness of those programs. In addition to studying various issues, the OIG identified pharmaceutical fraud and quality-of-care issues for beneficiaries residing in care facilities as two major areas for investigations. The Work Plan also described much of the OIG's preparations for the debut of the Part D prescription drug benefit. Below is a summary of the OIG's investigative priorities as set forth in the 2006 Work Plan.
Click to continue...Safe Harbor Proposed for Federally Qualified Health Centers
By: Lindsay E. Greenwood*
On July 1, 2005 the OIG issued a proposed rule that would establish regulatory standards for a safe harbor under the federal antikickback statute that would protect certain remuneration provided by an individual or an entity to certain health centers funded under section 330 of the Public Health Service Act when the safe harbor conditions are satisfied. 70 Fed. Reg. 38,081 (July 1, 2005).
Click to continue...OIG Advisory Opinions
By: William T. Mathias and Emily H. Wein*
On August 9, 2005, the OIG issued an advisory opinion regarding a hospital's proposed charitable donation (Proposed Donation) of a medical office building to a state-affiliated medical school for use as a family medicine clinic. The OIG analyzed the Proposed Donation under the antikickback statute, 42 U.S.C. §1320a-7b(b).
Click to continue...OIG Cites Antikickback Risks with PAPs Under Part D
By: Julie E. Kass
In a Special Advisory Bulletin (Bulletin) published November 22, 2005, in the Federal Register, the OIG raises concerns about the relationship between pharmaceutical manufacturer Patient Assistance Programs (PAPs) and Medicare Part D. The notice explains that although manufacturer PAPs have long provided important safety net assistance to patients of limited means who do not have health insurance for drugs, such programs may be at odds with the federal fraud and abuse laws with the commencement of Medicare Part D.
Click to continue...Nursing Staffing Data-posting Requirement for Nursing Facilities
By: Donna J. Senft
Prior to implementing a requirement to post nursing staffing data, nursing facilities were only required to report nursing staffing totals to the state survey agency in conjunction with the facility's annual survey. Federal legislation passed in 2000 created a requirement for Medicare- and Medicaid-certified nursing facilities to "post daily for each shift the current number of licensed and unlicensed nursing staff directly responsible for resident care in the facility." Benefits Improvement and Protection Act of 2000, Pub. L. No. 106-554, § 941, 114 Stat. 2763, 2763A-585. Additionally, the legislation required the Secretary of HHS to develop the specifications for the information to be "displayed in a uniform manner . and in a clearly visible place." Moreover, this staffing data is to be made available to the public upon request.
Click to continue...Providers Score a Victory in DSH Litigation
By: Thomas W. Coons
In August 2005, the United States Court of Appeals for the District of Columbia Circuit ruled that CMS must reopen certain Medicare cost reports and provide relief to providers seeking additional disproportionate share (DSH) payments under Medicare. In re Medicare Reimbursement Litigation, 414 F.3d 7 (D.C. Cir. 2005) (Baystate). This case is significant because hundreds of providers have filed actions in D.C. seeking the very relief the D.C. Circuit has now ordered. Thus, if a decision stands, it will likely lead to hundreds of millions of dollars in additional Medicare reimbursement.
Click to continue...CMS Relaxes Marketing Rules to Promote Part D Enrollment
By: Paul W. Kim
In an effort to promote beneficiary enrollment into Medicare Part D (the new prescription drug benefit), CMS published final regulations on September 1, 2005, and revised the marketing rules for endorsed prescription drug discount card sponsors effective October 1, 2005. 70 Fed. Reg. 52,019 (modifying 42 C.F.R. §§ 403.802, 403.806, and 403.813). Established by section 101, subpart 4 of the MMA (adding new SSA section 1860D-31), the Medicare Prescription Drug Discount Card and Transitional Assistance Program (the Program) was implemented by CMS in a recordbreaking timeframe through an interim final rule released only seven days after the enactment of the MMA. Basically, this voluntary Program charged an annual fee of up to $30 to provide discounts on certain drugs to the enrollees until the implementation of Part D.
Click to continue...Hospitals Face Increased Risks for Improper Discharge Coding
By: Carel T. Hedlund
In the final regulation for the FY 2006 Hospital Inpatient Prospective Payment System (IPPS), CMS once again changed the postacute care transfer policy. 70 Fed. Reg. 47,278 (Aug. 12, 2005). Now, 182 DRGs are subject to the payment rules for postacute care transfers, up from 30 DRGs in FY 2005. This significant change, coming hard upon an audit by the OIG finding that many hospitals had billed with inaccurate discharge status codes, increases the risks faced by hospitals for improper coding of discharge status.
Click to continue...CMS Issues First Stark Advisory Opinion in 7 Years
After a seven-year hiatus, CMS issued its first substantive advisory opinion analyzing the Stark Law in August 2005. CMS Advisory Opinion No. CMS-AO- 2005-08-01 (Aug. 22, 2005). Since 1998, the only Stark advisory opinions that CMS issued related to the specialty hospital moratorium issued in 2004 and 2005. CMS's most recent advisory opinion addresses whether the purchase and ownership of certain stock by physicians in a nonprofit, tax-exempt corporation operating a large group practice constitutes a financial relationship for purposes of the Stark law, 42 U.S.C. § 1395nn(a).
Click to continue...More Courts Support FCA Actions Based on Kickbacks
By: Leon Rodriguez*
The Eleventh Circuit decision in United States ex rel. McNutt v. Haleyville Medical Supplies Inc., 423 F.3d 1256, further confirms the ability of the government to use the False Claims Act to civilly sanction violations of the antikickback statute. In McNutt, it was alleged the owners of a medical services company paid kickbacks camouflaged as rental payments and commissions to pharmacists and other individuals in order to induce referrals for various services. A former employee filed a qui tam action in December 2001; the Justice Department later intervened.
Click to continue...First-to-file Bar Held Inapplicable to Qui Tam Suits
By: Ray M. Shepard*
The FCA imposes treble damages and penalties on those who submit false or fraudulent claims for payment to the United States government. 31 U.S.C. § 3729(a) The FCA encourages private parties, called "relators," who are aware of fraud against the government to bring an action under the qui tam provisions of the FCA. If the government intervenes and the action is successful, the qui tam relator may share in up to 25 percent of the government's recovery. 31 U.S.C. § 3730(d)(1). Successive qui tam lawsuits are not permitted, however, and only the first to file a qui tam action may qualify to share in the government's recovery.
Click to continue...Landmark Clausen Decision Reaffirmed
Without even hearing argument, the Eleventh Circuit Court of Appeals affirmed the dismissal of a qui tam relator's FCA complaint that had been filed by a former sales employee of two of the defendants. See Corsello v. Lincare, Inc., 2005 WL 2663288 (11th Cir. Oct. 20, 2005). The basis of the dismissal was the relator's failure to plead his fraud claims with particularity as required by Rule 9(b) of the Federal Rules of Procedure Under Rule 9(b), "the circumstances constituting fraud or mistake shall be stated with particularity."
Click to continue...Proposed Rule Allows Waiver of Exclusion
By: Lindsay E. Greenwood*
Under a rule proposed by CMS in August 2005, providers excluded from the Medicare program could request that CMS act on their behalf to recommend to the OIG that their exclusion from Medicare be waived because of a hardship that would result for Medicare beneficiaries. 70 Fed. Reg. 44,879 (Aug. 4, 2005). The proposed rule establishes general requirements and procedures to implement section 949 of the MMA, which outlines the basis upon which a request for waiver of exclusion must be based.
Click to continue...Erlanger Resolves Scrutiny of Its Physician Relationships
By: Michele M. Vincente
The $40 million settlement announced October 24, 2005, between Erlanger Medical Center (Erlanger), the United States, and the State of Tennessee brought to a close a two-year investigation of the Chattanooga, Tennessee, hospital's financial relationships with faculty plan physicians. Payments to the United States totaled $37 million; the State of Tennessee received $3 million of the settlement amount. In addition, as part of the settlement, Erlanger entered into a five-year comprehensive corporate integrity agreement (CIA) with the OIG.
Click to continue...Michigan Hospital Settles Voluntary Disclosure of Physician Relationships
In April 2005, a settlement agreement was entered into between St. Joseph Mercy-Oakland (SJMO) Hospital in Michigan and the OIG. The settlement related to a voluntary disclosure initially filed by the hospital in July 2001. The disclosure related to a number of relationships between the hospital and specific physicians.
Click to continue...Federal Government Settles Investigation of AdvancePCS
On September 7, 2005, the Civil Division of the DOJ, the United States Attorney's Office for the Eastern District of Pennsylvania, the OIG, and the Office of Personnel Management entered into a comprehensive Settlement Agreement with AdvancePCS, a pharmaceutical services company that administers pharmacy benefit management services for health plans and employers, including governmental employers. The investigation arose, in large part, from two separate qui tam whistleblower law suits filed by former employees of AdvancePCS and one of its predecessor companies.
Click to continue...When is a Home Health Agency Not a Home Health Agency?
By: Thomas K. Hyatt*
Most nonprofit health care providers are able to qualify as tax-exempt organizations. Home health agencies are typically among them. Since 1972, the Internal Revenue Service has expressly recognized that nonprofit home health agencies that are properly organized and operated can achieve recognition of 501(c)(3) status. However, in two recent rulings, the IRS denied or revoked tax-exempt status for home health agencies. It did so because they ran afoul of two well-settled positions of the IRS: the provision of management services to unrelated providers and the operation of a registry of health care providers are commercial activities and do not warrant recognition of tax-exempt status.
Click to continue...Full-system Contracting: Business as Usual or Antitrust Time Bomb?
Full-system contracting, also variously described as full-line forcing, bundling, or all-or-nothing contracting, is a widely utilized contracting practice under which a hospital system demands that a payor include all system hospitals or other components in the payor's network as a condition of including any of the system's hospitals in its network. This practice can take a variety of forms: requiring payors who want to contract with a desirable hospital to also contract with less desirable (whether because they are less efficient, lower quality, or have a lesser reputation) system hospitals; requiring the plan to also contract with physician networks or faculty groups, ambulatory surgery centers (ASCs), home health agencies, or other entities owned by or affiliated with the hospital system; requiring plans to contract with all system hospitals in separate geographic markets; requiring plans to contract with the hospital or system for all its services; and requiring plans to include all system hospitals and all their services in the richest benefit tier (i.e., lowest copay for enrollees) of the plan's products.
Click to continue...Stark, Antikickback Protection for E-prescribing, EHR
By: Christine M. Morse and Ray M. Shepard*
Section 101 of the MMA directed the OIG and CMS to establish regulations that would protect arrangements involving the donation of technology used for receiving and transmitting electronic prescription drug information. Currently, such donations by one health care provider to another could potentially violate both the federal antikickback statute and the physician self-referral (Stark) law.
Click to continue...More Specificity in Informed Consent
Recent decisions by CMS and a Maryland professional board demanding significantly more specific disclosures in informed consent forms have potentially raised the stakes in the ongoing effort to balance patient autonomy with the practical concerns of providers in an effective consent process. Facilities should be aware of current requirements and stay abreast of developments that may create new or unexpected liabilities.
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