Hospital Agrees to Multimillion-Dollar Settlement for Improper Payments and Leases

A suburban Chicago medical center has agreed to pay $36 million to the federal government and the State of Illinois to resolve issues related to improper payments, leases and loans to physicians ($33 million to Medicare and $3 million to the state) that took place from 2002 through 2007. Condell Health Center (Condell) voluntarily disclosed that it received improper Medicare and Medicaid payments; it did not admit liability. By agreeing to the settlement, the hospital prevented the federal government from filing a lawsuit under the federal False Claims Act. The violations were uncovered as part of the medical center’s due diligence with Advocate Health Care, which had entered into a deal to buy the hospital. Three aspects of Condell’s relationship to physicians were part of the settlement: (1) leases of medical space at rates below fair market value; (2) improper loans to physicians; and (3) reimbursement to physicians who performed services without written agreements. The settlement is a timely reminder for hospitals to review their relationships with physicians, particularly focusing on ensuring that leases and other relationships are entered into at fair market value.

Health IT Vital for Quality & Safety Improvement, Says Joint Commission

According to a new Joint Commission report, the “adoption of healthcare information technology is key to hospital viability in the future.” Health care IT is essential in improving quality and safety in health care, says the report. As health care costs continue to grow and patient needs become increasingly complex, hospitals must respond to these challenges in new ways. The report discusses how health care IT can improve health care quality, increase patient safety and meet the challenges of older and sicker patients. Digital technology can be used to facilitate patient-centered hospital care and continue that care outside the hospital. The full report, “Health Care at the Crossroads: Guiding Principles for the Development of the Hospital of the Future,” may be viewed here.

Health Care Fraud Still a Top Government Enforcement Priority

According to the Department of Justice, the federal government recouped $1.34 billion in settlements and judgments under the False Claims Act in the fiscal year ending Sept. 30, 2008. $1.12 billion came from health care entities, bringing total recoveries to approximately $21 billion since 1986 when Congress substantially strengthened the civil False Claims Act. Some of the largest settlements involved allegations of off-label promotion by pharmaceutical manufacturers, as well as antikickback violations by drug firms, device makers and hospitals involving illegal referral arrangements. Almost 80 percent of the government's $1.34 billion in total recoveries came from lawsuits initiated by whistleblowers. Significantly, physicians are rarely targeted under the False Claims Act as they have increasingly provide documentation and testimony to government regulators. Notwithstanding other developments, it is clear that combating health care fraud continues to be a serious federal government priority yielding tangible results that the federal government can trumpet. For more information about the government’s antifraud efforts and examples of significant cases in the last year, please click here.

Pay-for-Performance Proposal for Medicare Part A Reimbursement

Two key high-ranking members of the U.S. Senate, Sens. Max Baucus (D-Mont.) and Charles Grassley (D-Iowa), have proposed that Medicare Part A payments for myocardial infarction and other conditions be linked to hospital performance on a variety of quality measures. In addition to myocardial infarction, the proposal would apply to heart failure, pneumonia and surgical care, and the measures would be based on guidelines issued by organizations such as the National Quality Forum. The program, which will gradually be phased in over four years beginning in 2012, would also measure overall patient satisfaction of hospital care. Each hospital would have a different value-based incentive payment percentage, calculated by multiplying the hospital's current DRG and performance score. The proposal is a continuation of the Medicare hospital pay-for-reporting program started in 2003 that increased reimbursement to hospitals that reported on compliance with identified quality measures. The new proposal focuses not just on reporting, but on how well the hospitals actually perform on these quality measures. Currently, the Centers for Medicare & Medicaid Services (CMS) is running a demonstration project to test the pay-for-performance principles in Medicare Part B.

Imaging Efficiency Measures Proposed by CMS

Through the Lewin Group and its subcontractors, CMS has announced a 30-day comment period lasting through Dec. 14, 2008, regarding a draft set of measures intended to improve efficiency in the provision of outpatient imaging services. According to CMS, the proposals are in response to the growth in volume of imaging services, which grew by almost 10 percent annually from 1999 through 2003. Currently, there are four proposed measures: (1) SPECT MPI and Stress Echocardiography for Preoperative Evaluation for Low-Risk Non-Cardiac Surgery Risk Assessment; (2) Use of Stress Echocardiography or SPECT MPI Post-Revascularization Coronary Artery Bypass Graft; (3) Use of Computed Tomography in Emergency Department for Headache; and (4) Simultaneous Use of Brain Computed Tomography and Sinus Computed Tomography. Comments can be submitted through an online survey available at the website, or can be e-mailed to Imaging.Measures lewin.com.

CMS Reports Improper Payment Rates

CMS announced that it saved approximately $400 million of taxpayer dollars as improper payments decreased from 3.9 percent in fiscal 2007 to 3.6 percent ($10.4 billion) in fiscal year 2008. CMS also reported its first Medicare Advantage improper payment rate of 10.6 percent ($6.8 billion) for calendar year 2006. Fiscal year 2007 national composite error rates for Medicaid and for SCHIP were also reported for the first time. The Medicaid composite error rate is 10.5 percent ($32.7 billion), of which the federal share is $18.6 billion, and 14.7 percent ($1.2 billion), with a federal share of $800 million, for SCHIP. Improper payment rates include those payments that may have been paid incorrectly and do not necessarily reflect fraud, such as claims for services that were medically unnecessary or incorrectly coded. CMS points out that the majority of Medicaid and SCHIP errors are due to inadequate documentation.

New Jersey Adopts Hospital Trustee Education Regulations for Recently Appointed Trustees

The New Jersey Department of Health and Senior Services (DHSS) adopted final regulations on the hospital trustee education law passed in May 2007. The regulations apply to any trustee or director of a nonprofit or for-profit, acute care general hospital, appointed after April 30, 2007. Trustees will be required to take a minimum of seven hours of education designed to clarify the roles and duties of a hospital trustee. The training must be completed no later than six months after the date the trustee is appointed as a member of the board, except that trustees appointed from April 30, 2007, through Nov. 17, 2008, must complete their training by May 19, 2009.

The trustee training program must address each of the following subjects:

  • Ethical and fiduciary responsibilities of a member;
  • Role of the governing body in improving health care quality and the mechanisms available for doing so;
  • Hospital financial management, and understanding financial statements, and reimbursement and finance payment systems;
  • Hospital organization and governance; and
  • Legal and regulatory compliance issues.

A hospital must submit to DHSS a description of the course names, goals, and objectives for each of the required subject matters 60 days before offering a training program. The program may be offered in person at a classroom or seminar, online, by audio/webinar or through simulcast by approved training providers. Training providers are required to issue certificates of completion, which the hospital must maintain, to all attendees who successfully complete a course.

The regulations require general hospitals to file with their applications for licensure or licensure renewal the names of the chairperson and the members of the hospital’s governing body, the terms of office, and start and end dates for each member of the governing body.

New Jersey Gov. Jon S. Corzine signed into law in August 2008 legislation requiring all trustees and directors, appointed on or before April 30, 2007, to be subject to the same education requirements. The DHSS proposed to amend the education regulations on Dec. 1, 2008, to implement the August 2008 legislation, requiring all trustees appointed before April 30, 2007, to complete the training requirements by May 17, 2009.

New Jersey Senate Continues Work on Physician Self-Referral Legislation

In 2007, a New Jersey court ruled in Garcia v. HealthNet of New Jersey that physicians who refer patients to ambulatory care facilities (ACFs) in which they have a financial interest could be in violation of the Codey Act, New Jersey’s physician self-referral law. The New Jersey Legislature first introduced amendments to the Codey Act in March 2008, in response to the ruling that endangered many existing ACF relationships.

The Senate amended the bill Nov. 24, 2008, to restrict licensure of new ACFs to (a) surgical practices; (b) facilities that are jointly owned by a general hospital in New Jersey; (c) facilities owned by a hospital or medical school; and (d) certain licensed facilities and registered surgical practices in which there is a transfer of ownership or relocation within 20 miles from the practice or facility’s current location, there is no expansion in the scope of services provided by the practice and the Commissioner approves the transfer or relocation.

For purposes of the bill, a surgical practice has no more than one room dedicated for use as an operating room that is specifically equipped to perform surgery; has one or more postanesthesia care units or recovery areas; and is established by a physician, physician professional association surgical practice or other professional practice form for the individual or entity’s private medical practice.

The bill clarifies the physician referral restrictions to permit physicians to refer patients for a medical treatment or procedure that is provided at the physician’s medical office, and for which the patient is billed directly by the physician, or his or her medical practice.

The bill also permits referrals to registered surgical practices or licensed ACFs if the following conditions are met:

  • The physician with the financial interest refers the patient and also personally performs the procedure;
  • The physician’s financial interest is not related to volume of patients referred;
  • All clinical decisions are made by practicing physicians;
  • The patient is given prior written notice of the physician’s financial interest; and
  • The patient is informed whether the services will be considered to be, and reimbursed at, an out-of-network level by the patient’s insurance carrier or third-party payor.

Surgical practices will be required to register with the DHSS within one year of the effective date of the law and will be subject to annual reporting requirements. As a requirement of registration, a surgical practice will be required to obtain certification by the CMS, or an accrediting body recognized by CMS, as an ACF provider. In addition, existing ACFs will be required to obtain ambulatory care accreditation within one year of the effective date of the bill, and new ACFS must be accredited as a condition of DHSS licensure.

A final vote on the amended bill is expected December 15, before action is taken by the Assembly and the Governor. ACFs in operation on the date the bill is adopted will have one year to comply with the new requirements regarding physician referrals.

Source: Health Law Regulatory Update