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Health Law Update June 2012


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Health Law Update June 2012

  1. 1. June 2012 In This Issue: New OIG Opinion on Anesthesia/ASC Arrangements CMS: Independence at Home Demonstration Project CMS: Increasing Payment for Primary Care Strike Force Take-Down Unparalleled Brach Eichler in the News HIPAA CornerFEDERAL UPDATE they cannot do directly; that is, to receive compensation in the form of a portion of the [anesthesia group’s] revenues, in return for the referrals.”OIG Disapproves of Proposed Anesthesiology For additional information, contact:Arrangements with ASCs John D. Fanburg  |  973.403.3107  | Mark E. Manigan  |  973.403.3132  |  mmanigan@bracheichler.comThe United States Department of Health & Human Services Officeof Inspector General (OIG) recently issued Advisory OpinionNo. 12-06 addressing anesthesiology arrangements with ambulatorysurgical centers (“ASCs”). The advisory opinion was in response OIG Approves Supermarket and Pharmacyto an anesthesiology group’s request for clarification concerning Rewards Programtwo possible contractual scenarios. The United States Department of Health & Human ServicesIn Proposed Arrangement A, the anesthesiology group would Office of Inspector General (OIG) issued Advisory Opinion No.enter into an arrangement with an ASC to bill and collect for 12-05 relating to a rewards program contemplated by an organizationthe provision of anesthesia services for patients of the ASC. The operating supermarkets and pharmacies. Under the proposal, theanesthesia group would enter into a management agreement organization would provide customers a discount of 10 cents perpursuant to which the anesthesia group would pay the ASC a gallon on gasoline purchases when they spend $50 in the supermarketmanagement fee for providing pre-operative nursing assessments or pharmacy on “allowable purchases.” The out-of-pocket costsand assistance with transferring billing documentation to the (including deductibles and co-payments on federally reimbursableanesthesia group’s billing office. The management fee would be in prescription items) would be eligible to earn the gasoline discounts.the form of a “per patient” fee for non-Medicare patients, which thegroup certified was set at fair market value. The OIG determined that the arrangement would not violate the federal civil monetary penalty law (CMP) or anti-kickback statute.The OIG advised that arrangements that “carve out” Medicarebusiness/patients may be disguised revenues related to non-Medicare With respect to the CMP, the OIG noted that many customersbusiness. As a result, the OIG determined that there is risk that the would receive discounts in excess of the CMP’s existing exceptionanesthesia group would be paying the management fees with regard for nominal incentives valued at up to $10 per item or $50 per non-Medicare patients to induce the ASC’s referral of all of its However, a new exception under the Affordable Care Act (6402(d)(2)patients, including Medicare patients. (B)) allows for rewards offered by retailers. The OIG found that the arrangement satisfied the new exception because (1) the rewardIn Proposed Arrangement B, the physician-owners of the ASCs would consist of a coupon or rebate from the retailer; (2) the rewardswould form a separate corporate entity for the sole purpose of billing were offered on equal terms regardless of health insurance status;ASC patients for the provision of anesthesia services. The entity and (3) the rewards were not tied to the provision of other items orwould engage the anesthesia group as an independent contractor services reimbursed by federal health care provide the following services: recruiting, credentialing andscheduling anesthesia personnel; ordering and maintaining supplies The OIG found minimal risk of fraud and abuse under the anti-and equipment; assisting the entity in selecting and working with a kickback statute because customers would not be required tobilling company; monitoring and overseeing regulatory compliance; purchase prescription items or other federally-reimbursableproviding financial reports; implementing quality assurance products, they would not receive an incentive for transferringprograms; and providing logistics services. their prescriptions to the organization’s pharmacies and the arrangement was unlikely to result in overutilization or otherwiseThe OIG declined to approve the arrangement, and expressed increase costs to federal health care programs.concern that the arrangement is a suspect contractual joint venture,exposing the group to potential violation of the anti-kickback For additional information, contact:statute. Citing its 2003 Advisory Bulletin concerning contractual Kevin M. Lastorino  |  973.403.3129  |  klastorino@bracheichler.comjoint ventures, the OIG determined that the proposed arrangement is Carol Grelecki  |  973.403.3140  |“designed to permit the ASC’s physician-owners to do indirectly what continued on page 2
  2. 2. BRACH EICHLER CMS Announces First Round of Participants for calendar years (CYs) 2013 and 2014 Independence at Home Demonstration Project • rants states more than $11 billion in federal funds over two G years to support Medicaid primary care delivery systems On April 26, 2012, the Centers for Medicare Medicaid Services • pplies to primary care services delivered by physicians A (CMS) announced that it has selected the 16 initial health care specializing in family medicine, general internal medicine providers to take part in a demonstration project, created by the or pediatric medicine, and related subspecialists Affordable Care Act, allowing Medicare patients with chronic conditions to receive care at home. The project, called “Independence • rovides guidance on identification of eligible primary care P at Home,” with a start date of June 1 and an end date of May 31, 2015, services and providers, implementation of increased payments is intended to test a service delivery model using physician and nurse and payment of vaccine administration fees under the Vaccine practitioner-directed primary care teams to provide services to certain for Children program. Medicare beneficiaries in their homes. In its press release, CMS states The temporary increase in payment for primary care services that the participants of this demonstration project “will test whether will be paid entirely by the federal government, with no state delivering primary care services in the home can improve the quality matching of payment required. In particular, states will receive of care and reduce costs for patients living with chronic illnesses.” 100% federal financial participation for the difference between Up to 50 health care providers will ultimately be chosen to participate the Medicaid state plan payment amount as of July 1, 2009, and the in the project, each of which must serve at least 200 Medicare Medicare rates in effect in CYs 2013 and 2014 or, if greater, fee-for-service beneficiaries with multiple chronic conditions and the payment rate that would be applicable using the CY 2009 functional limitations. Medicare conversion factor. The proposed regulations also note For additional information, contact: that, “[a]s we move towards CY 2014 and the expansion of Medicaid eligibility, it is critical that a sufficient number of primary care Todd C. Brower  |  973.403.3103  | physicians participate in the [Medicaid] program,” and these rate Carol Grelecki  |  973.403.3140  | increases “will encourage primary care physicians to participate in Medicaid by increasing payment rates.” For additional information, contact: Medicare Health Outcome Survey Open Joseph M. Gorrell  |  973.403.3112  | for Comments Debra C. Lienhardt  |  973.364.5203  | On April 27, 2012, the Centers for Medicare Medicaid Services (CMS) published a notice in the Federal Register that it is seeking to revise the Medicare Health Outcome Survey (HOS) to better CMS Issues Rules Easing Regulations for identify possible fraud. Hospitals and Health Care Providers By way of background, the HOS is the first patient-reported outcomes measure used in Medicare managed care. The goal On May 16, 2012, the Centers for Medicare Medicaid Services of the HOS program is to gather valid, reliable and clinically published two final rules in the Federal Register, to eliminate rules meaningful health status data in the Medicare Advantage (MA) that the U.S. Department of Health Human Services (HHS) has program for use in quality improvement activities, pay for determined are unnecessary, obsolete or burdensome on American performance, program oversight, public reporting and improving hospitals and health care providers. health. All managed care organizations with MA contracts must The first rule revises Medicare Conditions of Participation (CoPs) participate. Additional information regarding the survey can be for hospitals and is anticipated to save $940 million per year. The found at revisions include: For additional information, contact: • llowing a single governing body for multiple hospitals in A a multi-hospital system Kevin M. Lastorino  |  973.403.3129  | • roadening the concept of “medical staff” to allow hospitals B Debra C. Lienhardt  |  973.364.5203  | to include other practitioners, such as advance practice nurses, physician assistants and pharmacists, on a hospital’s medical staff CMS Issues Proposed Rule on Increasing • llowing hospitals to have an optional program for patients A to self-administer certain medications Payment for Primary Care • Allowing hospitals to use standing orders, order sets and protocols On May 9, 2012, the Centers for Medicare Medicaid Services • liminating the requirement for authentication of verbal orders E (CMS) issued a proposed rule that seeks to increase Medicaid within 48 hours and instead require that authentication occur in payments for certain primary care services. Among other changes, compliance with state laws the proposed rule: • liminating the requirement that hospitals maintain an infection E • mplements the Affordable Care Act’s requirement that I control log Medicaid reimburse primary care physicians for services CMS • liminating the requirement of a single director of outpatient E designates as “primary care services” at Medicare rates instead services position. of state-established Medicaid rates (which often are lower) in2
  3. 3. BRACH EICHLERThe second rule, the “Medicare Regulatory Reform” rule, seeks to clarify waiver, disclosure and payment issues for out-of-networkto promote efficiency by eliminating duplicative, overlapping and (OON) benefits. While a laudable goal, the bill instead createsoutdated regulatory requirements for health care providers. HHS more problems than it seeks to resolve. Under the bill, if a provideranticipates savings of $200 million in the first year this rule is in furnishes OON services, the provider must make at least threeeffect. Provisions of the rule include: documented good faith attempts to collect before waiving the patient’s• liminating outdated ambulatory surgical center infection control E financial responsibility. Waiver would then be permissible only if due programs (a new CoP dedicated to infection control makes this to a medical or financial hardship, only if waivers are not routinely requirement duplicative) given, and only if the patient’s insurer is notified. This is generally consistent with current case law and regulatory guidance in New Jersey.• etiring older versions of e-prescribing truncations for Medicare R Part D and adopting the newer versions to be in compliance with However, the bill also indicates that, if an OON provider furnishes current e-prescribing standards services in an in-network licensed facility, the provider cannot bill the patient beyond the patient’s in-network co-payment, co-insurance• imiting mandatory compliance with the Life Safety Code to End L or deductible. In essence, the OON provider would receive payment Stage Renal Disease Facilities located adjacent to “high hazardous” as if he was in-network. Moreover, it is unclear whether the OON occupancies and those facilities that do not have a readily available provider who is paid based on in-network rates would have any exit to the outside contractual protections or rights against the insurer. Indeed, there• emoving outdated personnel qualifications for physical and R would be no signed contract between the OON provider and the occupational therapists in the current Medicaid regulations. insurer. Additionally, it is unclear whether an OON provider can be forced to accept in-network rates that he never negotiated or agreedFor additional information, contact: to. Furthermore, it is unclear whether the OON provider can bill,Lani M. Dornfeld  |  973.403.3136  | if at all, the in-network facility or the insurer for the differenceKeith J. Roberts   |  973.364.5201  | between the in-network and OON rates. If enacted, the bill would also lead to providers having less leverage in contract negotiations with insurers.Strike Force Take-Down Unparalleled The bill is being watched closely by physicians, ambulatory surgery centers and hospitals, all of which have voiced opposition.A seven-city sweep last month resulted in the arrest of 107 defendantsin the largest take-down since the establishment of the Medicare For additional information, contact:Strike Force. Medicare fraud schemes are alleged to have resulted in Mark E. Manigan  |  973.403.3132  |  mmanigan@bracheichler.compayments of over $452 million due to false billing. Payments have also John D. Fanburg  |  973.403.3107  |  jfanburg@bracheichler.combeen halted to more than 52 health care providers suspected of fraudbefore payments were made. More than 500 law enforcement agentsparticipated in the take-down. Christie Vetoes Bill to Create Health Care ExchangesThe strike force is a joint effort by the Department of Health and Tied to Health Care Reform LawHuman Services and the Office of Inspector General, designed towork together and weed out Medicare fraud. The defendants include New Jersey Governor Christie recently vetoed a bill (A-2171) that wouldphysicians, nurses and health care company owners, charged with have set up a statewide health insurance exchange in New Jersey ascrimes ranging from money laundering to anti-kickback violations. required by the Affordable Care Act (ACA), stating that it would beOther charges include false billing for services that were either neverprovided or not deemed medically necessary. Various services were imprudent to create an exchange until the U.S. Supreme Court hasinvolved in the schemes, including home health care, mental health, ruled on the constitutionality of the ACA. Governor Christie is thepsychotherapy, physical and occupational therapy, durable medical second governor this year to veto a health insurance exchange and ambulance services. Charges were brought against For additional information, contact:defendants in Miami, Baton Rouge, Houston, Los Angeles, Detroit,Tampa and Chicago. Joseph M. Gorrell  |  973.403.3112  | Todd C. Brower  |  973.403.3103  |  tbrower@bracheichler.comFor additional information, contact:Keith J. Roberts  |  973.364.5201  |  kroberts@bracheichler.comJoseph M. Gorrell  |  973.403.3112 │ Brach Eichler In The News John Fanburg presented a webinar, “What’s Happening in the NewSTATE UPDATE Jersey Medical Practice Acquisition Market?” for the Medical Society of New Jersey on April 25.Health Care Disclosure and TransparencyAct Appears Murky On June 14, Brach Eichler hosted the 4th annual NJ ASC Review, held at Ocean Place in Long Branch.On May 10, 2012, a bill was introduced in the New Jersey legislatureentitled the Health Care Disclosure and Transparency Act (A.2751) continued on page 4 3
  4. 4. BRACH EICHLER On June 14, Todd C. Brower and Lani M. Dornfeld presented Schwarzenegger, without authorization. Soon thereafter, UCLA “Hot Button Areas in Compliance and How to Implement an terminated the defendant after a formal internal grievance hearing. Effective Compliance Plan” at the Annual Home Care Association In 2008, the United States Attorney’s Office for the Central District Meeting in Atlantic City. of California charged Zhou with a misdemeanor violation of Brach Eichler is a sponsor of the New Jersey Healthcare Real Estate HIPAA’s prohibition against “knowingly” obtaining individually Summit, June 27 at the Newark Club. Alan Hammer will moderate identifiable health information in violation of HIPAA. Zhou moved the keynote panel discussion featuring industry leaders like Barry Ostrowsky, President CEO of Barnabas Health System, and to dismiss the charge on the basis that the word “knowingly” in Barry Rabner, President CEO of Princeton HealthCare System. HIPAA required that he have knowledge that it was illegal to obtain such protected health information. However, a federal magistrate Jonathan Bick authored an article in the April 30 New Jersey Law Journal, Health Care Law, entitled Applying Technology to the judge denied the motion. Zhou entered a conditional guilty plea, Business of Health Care. reserving his right to appeal the denial of his motion to dismiss. On appeal, Zhou claimed that the use of the word “knowingly” in HIPAA CORNER the statute means that an individual could not be prosecuted for violating the statute unless he knew his actions were illegal. The Ninth Circuit Court Finds that Knowledge Not Ninth Circuit rejected Zhou’s interpretation and held that, “as Required for HIPAA Criminal Liability used in the statute, the term ‘knowingly’ applies only to the act of On May 10, 2012, the United States Court of Appeals for the Ninth obtaining the health information,” and did not require an individual Circuit held, in United States v. Zhou, No. 10-50231 (9th Cir. May to know that his actions may have violated HIPAA. The Court’s 10, 2012), that HIPAA’s criminal misdemeanor provision, which upholding of the denial of the motion to dismiss made effective penalizes the unauthorized access of patient health information, does Zhou’s guilty plea, with a sentence of four months in prison and a fine not require a defendant to know that his or her actions were illegal of approximately $2,100. under the statute. Although not binding outside of the Ninth Circuit, this recent By way of background, in October of 2003, the defendant, Huping decision is significant because it emphasizes how easily individuals Zhou, a research assistant at the University of California at Los who do no more than access health information out of curiosity Angeles (UCLA) Health System, received a notice of UCLA’s intent can be found criminally liable. to dismiss him for poor performance. On that same evening, Zhou For additional information, contact: allegedly accessed the patient records of co-workers and well- Todd C. Brower  |  973.403.3103  | known actors, including Tom Hanks, Drew Barrymore and Arnold Lani M. Dornfeld  |  973.403.3136  | Attorney Advertising: This publication is designed to provide Brach Eichler, L.L.C. clients and contacts with information they can use to more effectively manage their businesses. The contents of this publication are for informational purposes only. Neither this publication nor the lawyers who authored it are rendering legal or other professional advice or opinions on specific facts or matters. Brach Eichler, L.L.C. assumes no liability in connection with the use of this publication. Health Care Practice Group | 101 Eisenhower Parkway, Roseland, NJ 07068 | 973.228.5700 Members Todd C. Brower | 973.403.3103 | Carol Grelecki | 973.403.3140 | Lani M. Dornfeld | 973.403.3136 | Kevin M. Lastorino | 973.403.3129 | John D. Fanburg, Chair | 973.403.3107 | Debra C. Lienhardt | 973.364.5203 | Joseph M. Gorrell | 973.403.3112 | Mark E. Manigan | 973.403.3132 | Keith J. Roberts | 973.364.5201 | Counsel Richard B. Robins | 973.403.3147 | Associates Lindsay P. Cambron | 973.364.5232 | Colleen McClafferty | 973.364.5210 | Jenny Carroll | 973.364.5223 | Conor F. Murphy | 973.364.5214 | Jordan T. Cohen | 973.403.3144 | Isai Senthil | 973.403.3150 | Chad Ehrenkranz | 973.364.5234 | Edward J. Yun | 973.364.5229 | Rita M. Jennings | 973.364.5204 | You have the option of receiving your Health Law Updates via e-mail if you prefer, or you may continue to receive them in hard copy. If you would like to receive them electronically, please provide your e-mail address to Thank you.4