CMS Launches New Effort to Combat Fraud

The Centers for Medicare and Medicaid Services (CMS) will undertake new efforts to fight fraud and abuse in the Medicare program. The Agency announced that it is consolidating its efforts with new program integrity contractors that will analyze Medicare billing patterns. These contractors will focus on companies and individuals whose billings for Medicare services are higher than the majority of providers and suppliers in the community. The Agency is also examining Medicare billings in seven at-risk states: California, Florida, Illinois, Michigan, New York, North Carolina and Texas. The effort will focus on durable medical equipment companies that inappropriately bill Medicaid or Medicare for equipment, such as wheelchairs and oxygen supplies. The new efforts include:

  • Conducting more stringent reviews of new DMEPOS suppliers’ applications, including background checks;
  • Making unannounced site visits to double check that suppliers and home-health agencies are actually in business;
  • Verifying claims submitted by physicians who order a high number of certain items or services by sending follow-up letters to these physicians; and
  • Identifying and visiting high-risk beneficiaries to ensure they are appropriately receiving the items and services for which Medicare is being billed.

For claims not reviewed before payment is made, CMS is implementing further medical review of submitted DMEPOS claims by one of the new recovery audit contractors (RACs). The RACs review paid claims for all Medicare Part A and B providers to ensure their claims meet Medicare requirements.

Significantly, CMS is consolidating the work of Medicare’s program safeguard contractors (PSCs), and the Medicare Drug Integrity Contractors (MEDICs) with new Zone Program Integrity Contractors (ZPICs). The new contractors will eventually be responsible for ensuring the integrity of all Medicare-related claims. The first two ZPIC contracts were awarded to Health Integrity, LLC for Zone 4, which covers Texas, New Mexico, Colorado, and Oklahoma, and SafeGuard Services, LLC for Zone 7, which includes Florida, Puerto Rico and the U.S. Virgin Islands.

Tenth Circuit Rejects False Claims Act Argument Based on Certification of Annual Cost Report

Earlier this month, the Tenth Circuit Court of Appeals in United States ex Rel. Conner v. Salina Regional Health Center, Inc., rejected claims by a physician-relator that a hospital violated the False Claims Act (FCA) by not complying with Medicare Conditions of Participations (CoPs). The relator claimed that the hospital violated the FCA by certifying in its cost reports that it had complied with applicable laws and regulations even though the hospital had allegedly violated the CoPs. The Court concluded that “the annual cost report certification does not condition the government’s payment on perfect compliance with all underlying statutes and regulations, but rather seeks assurances that the provider continues to comply with the conditions of participation originally agreed upon.” The alleged false certification was not actionable under the FCA because it was not “material to the government’s decision to pay out moneys to the claimant.” While the case is limited to CoPs, it could have an impact on hospitals defending FCA lawsuits based on false certification theories of liability. To read the full case, please click here.

Favorable OIG Opinion for Preauthorization Services Provided to Radiology and Imaging Centers

The Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued Advisory Opinion No. 08-12 on Sept. 19, 2008, regarding a proposed arrangement under which a newly formed legal entity (Newco) would provide purely administrative insurance preauthorization processing and submission services for various radiology and imaging centers. Under the proposed arrangement, Newco would charge a "per-service" fee for each preauthorization processed and submitted, regardless of whether or not the patient's insurer ultimately grants the preauthorization for the subject radiology or imaging procedure.

The OIG concluded that the proposed arrangement would not generate prohibited remuneration under the Anti-Kickback Statute. The OIG provided the following reasons for its conclusion:

  • Newco is not a health care provider, practitioner or supplier, or in any way affiliated with the health care industry (other than through the performance of the services under the proposed arrangement);
  • Newco would furnish the insurance preauthorization process and submission services to health care providers and suppliers at an arm's-length fair-market rate;
  • Newco would not have the ability to receive or influence referrals;
  • The services under the proposed arrangement are distinguishable from arrangements involving marketing services, which by their nature are intended to promote a particular item or service;
  • Newco would not have contact with patients or anyone other than the radiology and imaging centers; and
  • Newco does not have, has not had, and would not have direct contact with private payor or federal health care program beneficiaries in the performance of its business and, thus, Newco is not in a position to receive or influence referrals of federal health care program business.

Nonetheless, the OIG noted that if a radiology or imaging center, or other third party, paid Newco to provide preauthorization processing and submission services for or on behalf of a referral source (such as a physician), and thus relieved the referral source of the costs of processing and submitting preauthorizations, the radiology or imaging center, or other third party, could then be providing prohibited remuneration in violation of the Anti-Kickback Statute. Access the full Opinion here.

E-Prescribing Rules to be Published Next Month

The Centers for Medicare and Medicaid Services (CMS) will issue a final rule in November 2008 regarding the new electronic prescribing provisions included in the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), signed into law this past summer. This new initiative is in addition to the Physician Quality Reporting Initiative (PQRI). Section 132 of MIPPA authorizes an incentive program for eligible professionals who are “e-prescribers" as defined by MIPPA. Generally, "e-prescribing" is the computer-based electronic generation, transmission and filling of a prescription.

Beginning Jan. 1, 2009, Medicare will offer physician payment incentives of 2 percent for e-prescribing in reporting years 2009 and 2010; 1 percent in 2011 and 2012, and 0.5 percent in 2013. The bonus is in addition to the separate 2 percent payment increase available under the PQRI. Beginning in 2012, payments actually will be reduced 1percent for those who are not "successful e-prescribers", with reductions of 1.5 percent in 2013 and 2 percent each year thereafter. You can find more information on this new initiative here.

Most Nursing Homes Cited for Violations in 2007

According to a report issued by the Department of Health and Human Services (HHS), 94 percent of nursing homes received citations for violating federal health and safety standards in 2007. The Department noted that for-profit nursing homes were more likely to be cited than nonprofit or other types of nursing homes. Of the nursing homes cited, 17 percent had problems that caused residents actual harm or immediate jeopardy. Common problems included infected bedsores, incorrect medication, poor diet, and patient abuse and neglect. To help nursing homes improve patient care and regulatory compliance, and to address significant changes in the way nursing facilities operate, the HHS Office of Inspector General has issued a supplemental voluntary compliance guidance addressing issues of patient care, fraud and abuse, and billing. You can find the guide here.

OIG Issues Favorable Opinion Regarding the Use of a "Preferred Hospital" Network as a Part of a Medigap Policy

The Department of Health and Human Services (HHS) Office of Inspector General (OIG) published Advisory Opinion No. 08-13 regarding the use of a "preferred hospital" network as a part of a Medicare Supplemental Health Insurance (Medigap) policy. Under the arrangement, a Medigap plan indirectly contracts with network hospitals for discounts on applicable Medicare Part A inpatient deductibles for its policyholders that the Medigap plan would otherwise have to pay. The Medigap plan then passes back part of its savings by reducing premiums to policyholders for utilizing a network hospital for an inpatient stay. The OIG concluded that it would not impose administrative sanctions under the Anti-Kickback Statute or the prohibition on inducements to beneficiaries in connection with this arrangement because of the low risk of fraud or abuse. Among other things, the OIG noted: (1) the discounts would not affect per service payments by Medicare because payments to hospitals under Part A for inpatient services are fixed and unaffected by the deductible amount; (2) the discounts should not increase utilization by beneficiaries because the beneficiaries already purchased Medigap policies to cover the entire deductible obligation; and (3) the arrangement would not unfairly affect competition among hospital since membership in the network would be open to any accredited, Medicare-certified hospital that meets the requirements of applicable state laws. You can read the full opinion here.

FDA Creates New Drug Safety Web Page

The Food and Drug Administration has created a first-of-its-kind web page for consumers and health care professionals that will include a variety of comprehensive safety information about prescription drugs. Categories of information on the web page include:

  • Consumer information about using medications safely and disposing of unused medicines;
  • Drug labeling, including patient labeling, professional labeling and patient package inserts;
  • A searchable database of post-market studies that are required from, or agreed to by, drug companies to provide the FDA with additional information about a drug's safety, efficacy or optimal use;
  • Consumer articles on drug safety;
  •, a searchable database of clinical trials, including information about each trial's purpose, who may participate, locations and useful phone numbers;
  • Drug-specific safety information, including safety sheets with the latest information about the drug as well as related FDA press announcements, fact sheets and drug safety podcasts;
  • Warning Letters, Import Alerts, Recalls, Market Withdrawals and Safety Alerts; and
  • Regulations and guidance documents;
Source: Health Law Regulatory Update