Leasing Arrangement Could Violate Anti-Kickback Statute, Concludes OIG Advisory Opinion

In a recent advisory opinion, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) concluded that a proposed arrangement in which a physician practice would provide space, equipment and personnel to other physician practices through part-time (or block) leases could generate prohibited remuneration under the Anti-Kickback Statute. The proposed arrangement would establish a joint-venture between Physician Practice A and other practices whereby Physician Practice A leases to other physician groups on a part-time basis a facility owned by Practice A for the other groups to provide intensity-modulated radiation therapy (IMRT) to their patients.

The OIG concluded that it was unable to exclude the possibility that the parties’ contractual relationship was designed to permit Physician Practice A to do indirectly what it cannot do directly, which is to pay the other practices a share of the profits from those practices’ IMRT referrals. Put another way, by agreeing to provide services it could otherwise provide in its own right for less than the available reimbursement, Physician Practice A may provide the other practices with the opportunity to generate a fee and a profit. The OIG also noted that if the intent of the proposed block-lease arrangement was to provide remuneration to the other practices through IMRT profits to induce referrals to the Physician Practice A, the arrangement would violate the Anti-Kickback Statute. To read the advisory opinion, please click here.

Controversial Proposed Regulation Allows Health Care Workers to Refuse Providing Certain Services

Under the conscience provisions of the Public Service Act and the Church Amendments, a new proposed federal regulation was issued by the HHS that would permit federally funded health care providers to exercise their “rights of conscience.” Such providers could not be compelled to provide lawful services with which they have a moral objection. The proposed regulation:

  • Clarifies that nondiscrimination protections apply to institutional health care providers and to individual employees working for recipients of certain funds from HHS;
  • Requires recipients of certain HHS funds to certify their compliance with laws protecting provider-conscience rights;
  • Designates the HHS Office for Civil Rights as the entity to receive complaints of discrimination addressed by the existing statutes and the proposed regulation; and
  • Charges HHS officials to work with any state or local government, or other entity, that may be in violation of existing statutes, and encourages voluntary steps to bring that government or entity into compliance with the law. HHS officials would consider all legal options, including termination of funding and the return of funds paid out in violation of the nondiscrimination provisions.

The proposed regulation would not restrict health care providers from performing any legal service or procedure. It would require a patient to seek such lawful services from a medical professional or institution that does not assert a conflict of conscience. Critics argue that the regulation will lead to significant censorship in vast areas of medical care and research, particularly those involving reproductive health. Proponents suggest that health care workers and providers should not be compelled or coerced into performing services with which they take moral issue. Given the potential ramifications of the regulation, it is likely that Congress will take up the issue in the next legislative session.

ASC Arrangement Considered Risky But OIG Still Rules Favorably

The OIG issued a favorable advisory opinion concerning a proposed ambulatory surgical center (ASC) jointly owned by a hospital and physician. Although the OIG noted that the purported arrangement carried some risk of violation of the Anti-Kickback Statute, it concluded that it would not impose administrative sanctions unless there is intent to induce or reward referrals. The arrangement involved the development of an ASC focused on orthopedic procedures. Eighteen orthopedic surgeons would have an equal investment interest in a partnership formed for the purpose of owning the ASC. The partnership would have a 70 percent ownership interest in the ASC; the hospital would own the remaining 30 percent. Prior to receiving treatment, patients would be notified in writing regarding the physicians’ interest in the ASC. The ASC also would have an exclusive contract with a hospital-owned practice for the provision of anesthesia.

The OIG found that although the arrangement does not meet all necessary requirements for safe harbor protection, there were enough safeguards in place to reduce the risk of fraud and abuse. The OIG determined that the risk of paying for referrals is mitigated because ownership is proportionate to each physician’s investment and the hospital has safeguards to reduce its ability to make or influence referrals to the ASC through the physicians who are employed by or under contract with the hospital. The OIG also noted that although the medical director agreement does not meet the personal-services safe harbor due to the lack of specificity of the part-time schedule, all the services to be provided are detailed in the agreement, reasonable and necessary, and compensated by a fixed fee unrelated to the volume or value of referrals. Read the full opinion here.

Government and Provider Enter Into First-Ever HIPAA Privacy and Security Resolution Agreement

The HHS entered into a resolution agreement with Providence Health & Services (Providence) to settle potential violations of the HIPAA privacy and security rules. Pursuant to the resolution agreement, Providence agreed to pay the government $100,000, and develop and implement a Corrective Action Plan to ensure that it appropriately safeguards electronic patient information. This marks the first time that HHS has entered into a resolution agreement with a covered entity for possible violations of HIPAA, as no violations were admitted. The agreement stems from lost and stolen backup tapes, disks and laptops that contained the health information of approximately 400,000 patients. HHS had received more than 30 complaints about the missing tapes and laptops. Although the government has not been overly aggressive in enforcing HIPAA violations, this agreement shows that the federal government will step up HIPAA enforcement in cases in which unauthorized disclosure involves multiple patients and where HHS receives many complaints about the same incident.

Final Rule Published Regarding Contractor Determinations and Revocation of Medicare Billing Privileges

The Centers for Medicare and Medicaid Services (CMS) published its long-anticipated final rule extending certain appeal rights to all providers and suppliers. The rule establishes an appeals process for all providers and suppliers whose enrollment, re-enrollment or revalidation application for Medicare billing privileges is denied and whose Medicare billing privileges are revoked, as well as establishing time frames for deciding those appeals. The rule also allows Medicare contractors to revoke Medicare billing privileges when a provider or supplier submits claims for services that could not have been furnished to a beneficiary and specifies that a Medicare contractor may establish a Medicare enrollment bar for any provider or supplier whose billing privileges have been revoked. Access the final rule here.

CMS Issues Final Rule on Payback of Overpayments

CMS has issued new provisions governing the payback of overpayments to the Medicare program under the extended repayment schedule (ERS). The CMS final rule implements Section 935(a) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 regarding the use of repayment plans for Medicare provider and supplier overpayments. The rule establishes criteria and procedures to determine when to grant a provider or supplier an ERS, and defines “hardship” and “extreme hardship.” View the entire rule here.

FDA Revises Process for Responding to Drug Applications

The Food and Drug Administration (FDA) has revised its means for communicating when a marketing application cannot be approved as submitted. Under new regulations, FDA's Center for Drug Evaluation and Research (CDER) will no longer issue “approvable” or “not approvable” letters when a drug application is not approved. Instead, CDER will issue a “complete response” letter at the end of the review period to let a manufacturer know of the agency's decision on the application – that the review period for a drug is complete and that the application is not yet ready for approval. The letter will describe specific deficiencies and, when possible, outline recommended actions the applicant might take to get the application ready for approval.

Changes Proposed to HIPAA Code Sets and Standards for Electronic Transactions

The HHS has issued a proposed rule calling for the replacement of the ICD-9 code sets with the expanded ICD-10 code sets, which were originally developed by the World Health Organization. Code sets are used by covered entities to submit claims electronically for reimbursement. In connection with implementing the new code sets, HHS proposed a separate rule to update HIPAA’s existing electronic-transaction standards (known as Version 4010/4010A1), with Version 5010, which will accommodate the larger ICD-10 code sets.

Under the proposed rule, diagnosis coding will be known as ICD-10-CM and inpatient hospital procedures will be coded using the ICD-10-PCS. According to HHS, the benefits of the new ICD-10 code sets include:

  • more accurate payments for new procedures and reductions in the number of rejected claims;
  • improved disease management;
  • harmonized disease monitoring and reporting worldwide; and
  • enabling the United States to compare its data with international data to track the spread of disease and treatment outcomes.

Additionally, the ICD-10 code sets will:

  • Allow Medicare to better detect fraud and abuse with more accurately defined diagnosis and treatment codes; and
  • Increase the accuracy of coding to support value-based purchasing, enabling CMS to spot “never events” for which Medicare will not provide reimbursement.

The deadline for commenting on the new ICD-10 code sets is October 21, 2008. The rules are scheduled to become effective October 1, 2011. To view the proposed regulations, please click here and here. You may also access the CMS Fact Sheets here and here.

Congress Approves Legislation Delaying Implementation of DMEPOS Competitive Acquisition Program

The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) delays implementation of the first round of the Competitive Acquisition Program (CAP). The initial CAP round will require patients in certain geographic areas to obtain certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS), including mail order diabetic supplies, only from suppliers that have been awarded contracts by CMS pursuant to competitive bidding. Lawmakers believed CAP would save the Medicare program money by improving the accuracy of payments and deterring fraud. Critics of CAP argued that it would limit patient access to care and diminish the quality of care. The delay terminates all contracts awarded under CAP.

Under the delay imposed by MIPPA, reimbursement to DMEPOS providers in areas affected by CAP reverts to the former DMEPOS fee schedule, as increased retroactive to July 1, 2008. As a result, beneficiary liability for cost-sharing will likewise increase retroactively. In response to industry concern, the OIG issued a policy statement assuring providers that they would not face administrative sanctions if they waived, in good faith, additional cost-share amounts owed by beneficiaries as a result of the retroactive increases. The fee schedule for 2009, however, will be reduced by 9.5 percent for services and items covered by the CAP, and the reduction will apply to all areas of the country. For more information, please click here and here.

CMS Posts Hospital Death Rates

CMS has added death-rate information for hospitals across the country to its website. The data covers heart attack, heart failure and pneumonia death rates for U.S. hospitals for over a two-year period. Data is also posted on the performance of hospitals meeting patient needs in 26 other categories.

The pneumonia death rate for each hospital is adjusted to account for the hospitals' resources and the patients' level of illness. CMS's statistical formula results in 95 percent certainty that the hospital's death rates fall within the given range. Critics of CMS's methodology say it results in only a small number of hospitals that appear to be doing better or worse than the national average. The information can be accessed here.

Joint Commission Reorganizes 2009 Standards, Plans New Cultural Standards

The Joint Commission has reorganized its hospital Standards and Elements of Performance. The Joint Commission did not add new requirements, but deleted and clarified some existing requirements. The 2009 standards are reordered and renumbered to better facilitate electronic sorting. The new standards will take effect January 1, 2009.

The Joint Commission is also planning new standards that will address cultural issues in patient care. The new standards, to be effective 2011, will address diversity, culture, language and health literacy. The Joint Commission is still determining whether the new requirements will be issued as new Standards or added to existing standards. Concepts for the new standards will be drawn from the Joint Commission's ongoing study “Hospitals, Language and Culture: A Snapshot of the Nation.” For more information, click here.

Source: Health Law Regulatory Update