Category: Health Care Law

False Claims Act: Do You Really Have Just 60 Days to Repay?

One of your employees informs you of a potential overpayment from Medicare. Do you really only have 60 days from that point to determine if it is indeed an overpayment and repay it?

The Patient Protection and Affordable Care Act of 2010 requires that a person who receives an overpayment of Medicare or Medicaid funds report and return the overpayment within 60 days of the “date on which the overpayment was identified,”  and makes the failure to do so a violation of the False Claims Act. 42 U.S.C. 1320a-7k(d)((2)-(3)(emphasis added). However, Congress didn’t define what it means toidentify a false claim.

On August 3, 2015, the United States District Court for the Southern District of New York issued the first  federal court decision addressing when an overpayment should be considered to be “identified” for purposes of determining whether there has been a False Claims Act violation.

The ruling came in the case of Kane v. Healthfirst, et al. and U.S. v. Continuum Health Partners Inc. et al., in which Continuum Health Partners Inc. “ which operated and coordinated a network of non-profit hospitals “ was accused of failing to make timely repayment of identified overpayments.

The potential false claim was first brought to the defendants’ attention in September, 2010 by New York State auditors. An employee of Continuum subsequently provided a preliminary list of potential overpayments to management in February, 2011. He was fired four days later and subsequently filed a whistle-blower action. It wasn’t until the government issued a Civil Investigative Demand in June, 2012 that Continuum reimbursed the government for a large number of claims. Continuum did not return all of the overpayments to the government until May, 2013 approximately two years after the initial internal email.

According to the ruling, approximately half of the February, 2011 preliminary list of overpayments did, in fact, constitute overpayments. The Continuum defendants had argued that the 60-day period began only after the overpayment was “classified with certainty.” The court, however, sided with the government and found that the 60-day clock starts when a person is “put on notice” that a claim may be overpaid.

The court tempered its ruling, though, by stating that a false claims violation occurs only when the “obligation is knowingly concealed or knowingly and improperly avoided or decreased.” Further, the court stated that “prosecutorial discretion would counsel against” an enforcement action in a situation involving “well intentioned” providers working with “reasonable haste” to rectify the issue. In such a case, the healthcare provider wouldn’t have acted with the “reckless disregard, deliberate ignorance, or actual knowledge” required to support a false claims case.

While the decision didn’t provide bright lines and identify exactly when that 60-day clock starts, one of the key takeaways is that once a potential overpayment is identified, a health care provider must take prompt action and follow through with a thorough internal review process to determine whether an overpayment truly exists. Then, it must make repayments to the extent required.

ARTICLE BY Steven E. Pozaric, Robert Schwendinger, Diane E. Felix, Jonathan F. Dalton & Bradley S. Byars of Armstrong Teasdale

© Copyright 2015 Armstrong Teasdale LLP. All rights reserved

Four Ways Medicare and Medicaid Have Changed the Health Care Industry

It’s a bizarre program that is absolutely essential to American healthcare.

That is the opinion of Theodore Marmor, professor of public policy at Yale and author of the book, The Politics of Medicare. Whether you agree with him or not, it is difficult to deny the influence of Medicare and Medicaid on the health care industry. To mark the 50th anniversary of Medicare and Medicaid, signed into law by President Lyndon Johnson on July 30, 1965, we have identified four ways these programs have shaped the health care industry.

  1. There is no stopping the health care juggernaut. In a March 2014 presentation during the conference of National Health Care Journalists, Rosemary Gibson (senior advisor with The Hastings Center) brought the point home with this statistic: In 1965, there were no health care companies listed in the Fortune 100. By 2013, there were 15. 

  2. The federal government is now the largest purchaser of health care in the United States. In its Primer on Medicare, The Kaiser Family Foundation estimates that 14% of the $3.5 trillion spent by the federal government in 2014 was spent on Medicare (approximately $505 billion total), making it the largest purchaser of health care in the United States. Its spending power means CMS and Medicare will continue to hold sway in the industry.

  3. Medicare and Medicaid is driving innovation, but have they run out of gas? US News & World Report estimates that today, one in three Americans is covered by Medicare or Medicaid, and it is that extension of coverage to a larger population that is driving innovation. In the article, “America’s Health Care Elixir,” Kimberly Leonard states, “Because the government covered more people, and eventually extended that coverage to include drugs and medical devices, industries knew they could invest in research because they would eventually recoup the costs of their work through sales of new products.” However, innovation is beginning to outstrip the programs’ ability to keep pace. For example, Leonard states, “Pharmaceuticals also are moving toward developing more expensive biologic drugs, which could be a challenge for Medicare and Medicaid to afford.” More important, the programs’ outdated structure, developed during a different business environment, serving a different population, is making it difficult for them to keep pace with technology.

  4. Medicare and Medicaid helped end segregation in health care facilities. One lesser-known positive effect on the industry is that these programs helped end segregation, at least at health care facilities. The programs required that health care facilities could not be racially segregated if they wanted to receive Medicare and Medicaid payments, which meant facilities had to start accepting African-American patients.

With the changes introduced with the Affordable Care Act, it is clear that the government is keen on keeping these programs going for another 50 years or more, and their legacy of influence in the health care industry continues to evolve. Where they will be in 50 years remains to be seen.

ARTICLE BY Health Care Practice Group of Foley & Lardner LLP

© 2015 Foley & Lardner LLP

Affordable Care Act Reporting Penalties Significantly Increased

On June 29, 2015, President Barack Obama signed the Trade Preferences Extension Act (the Act) into law. In addition to containing several revenue offsets, the Act significantly increased penalties for incorrect information returns, including those required by the Affordable Care Act (ACA).

The Internal Revenue Service (IRS) may impose penalties for both failing to file and filing incorrect or incomplete information returns and/or payee statements after the due dates for such forms pursuant to Internal Revenue Code Section 6721 and 6722. These penalty provisions apply to a variety of information reporting requirements including Forms W-2 and 1099, and now more recently to Forms 1094-B, 1095-B, 1094-C, and 1095-C relating to compliance with the ACA.

Below we have summarized a few of the notable penalty changes made by the Act.

Description Old Penalty Amount New Penalty Amount
Penalty for filing incorrect returns (per return) $100 $250
Penalty for incorrect returns if corrected within 30 days (per return) $30 $50
Penalty for incorrect returns if corrected by August 1
(per return)		 $60 $100
Penalty for intentionally disregarding to file timely and correct returns $250 $500
Maximum penalty per calendar year $1,500,000 $3,000,000
Maximum penalty per calendar year if corrected within 30 days

$250,000

$500,000
Maximum penalty per calendar year if corrected by August 1

$500,000

$1,500,000

Keep in mind that the final ACA regulations provide that penalties will not be imposed on entities that show they made good faith efforts to comply with the reporting requirements for 2015. The IRS has indicated that anuntimely filed form will not meet the good faith requirement. Should the requirements regarding ACA reporting not be met due to good faith requirements, the penalties may be still be waived if the failure was due toreasonable cause.

Because the penalties for incorrect forms are applied with respect to each incorrect form, it may be advisable, where possible, to take advantage of the combined form reporting where authorized. For example, an employer may use one Form 1094-C to transmit all Forms 1095-C rather than multiple Forms 1094-C.

In summary, employers should be aware that larger fines now exist for failures in reporting and the penalties apply to each incomplete or incorrect form. For example, intentionally incorrect information with respect to one employee could result in a penalty of $500 for both the Form 1095-C filed with the IRS and the Form 1095-C provided to the employee, for a total of $1,000 for that one employee. Furthermore, it is important to file all forms in a timely manner to show good faith under the ACA transition rule for 2015 Forms.

ARTICLE BY Jeffrey Arnold, Amy Gordon, Susan M. Nash & Ruth Wimer, Esq., CPA of McDermott Will & Emery
© 2015 McDermott Will & Emery

Employer Next Steps Post-Affordable Care Act Ruling

What should employers be thinking about now that the US Supreme Court has upheld the Affordable Care Act’s (ACA’s) premium assistance structure in King v. Burwell? Because the ACA, as we know it today, will remain in place for the foreseeable future, employers should continue to plan for and react to the numerous and detailed ACA requirements, including the following:

  • Determining their ACA full-time employee population—including whether contingent workers or independent contractors may be deemed to be common-law employees for ACA purposes.

  • Analyzing whether all ACA full-time employees and their dependents are being offered affordable ACA-compliant coverage at the right time.

  • Preparing for the exceedingly complicated 2015 ACA employer Shared Responsibility and individual mandate reporting due in early 2016 on Forms 1095-B and 1095-C and the associated transmittal forms.

  • Capturing ACA health plan design changes in plan documents, summary plan descriptions, open enrollment material, and required notices to respond to participant needs, lawsuits, and growing federal agency audits.

  • Paying the Patient-Centered Outcomes Research Institute fee in July.

  • Conducting the necessary plan design analysis and preparing for any changes necessary to avoid the Cadillac Tax in 2018.

ARTICLE BY Andy R. Anderson & Kimberly J. Boggs of Morgan, Lewis & Bockius LLP

Copyright © 2015 by Morgan, Lewis & Bockius LLP. All Rights Reserved.

Think Twice about DEA (Drug Enforcement Administration) Voluntary Surrender

It can be an intimidating experience to be sure… A DEA agent or Diversion Investigator, on an unscheduled visit to your office, confronts you with a KASPER, a KBML complaint or some other state regulatory action and alleges violations of the Controlled Substances Act. The DEA Agent then asks you to sign DEA Form 104. This form, which is titled “Voluntary Surrender of Controlled Substances Privileges,” is placed in front of you while the agent explains why you should sign it immediately, rather than face potential action to revoke your DEA and other adverse consequences. The DEA Agent tells you that you are already in deep, deep trouble (of a vague and unspecified nature), and that the simple act of signing this form can make your troubles go away and prevent federal action. Also, he tells you that all you have to do to get the number back is to reapply! Hold on…this is not the full story! This scenario is becoming a harsh reality and common situation for physicians, pharmacists, nurse practitioners, and PAs.

The truth is that signing any voluntary surrender will create multiple problems for providers including the loss of Medicare and Medicaid participation among other things that have the potential to destroy medical practices and livelihoods. Providers should know, for instance, that the DEA’s final rules, codified at 21 C.F.R. §§ 1301.52(a) and 1301.62(a), state that signing this form and handing it to a DEA employee will result in immediate loss of prescribing privileges for controlled substances in schedules II through V. When a voluntary surrender is executed, the DEA does not have to investigate further or bring any sort of charges – the signed form is akin to agreeing to a criminal sentence by bypassing an arrest, arraignment and trial, with the consequences being immediate forfeiture of a provider’s ability to prescribe any controlled substances. Make no mistake – the form may say “voluntary,” but it is in the best interest of the DEA to make the form as much the opposite as possible.

Prescription Drugs With A Syringe

When a provider signs the form, there are three important things that happen – the provider’s surrender becomes officially “voluntary,” no matter how much that provider was pressured into signing; the provider’s signature officially resolves any governmental concerns that led to the provider being asked to sign, essentially proving the government’s case for them; and the signature creates a waiver of any right to an administrative hearing that could prevent the loss of the provider’s DEA registration. In other words, signing the form essentially is an irrevocable action.

There are other consequences beyond the immediate loss of the registration number. Once a DEA registration number is lost, it becomes excruciatingly difficult to regain. The proceedings will likely take between 18 months and two years, with the DEA opposing the provider at every step. All the while, the provider has no DEA registration and can’t prescribe controlled substances, rendering practice potentially impossible.

Also, when the form is signed, the DEA reports it to Medicare and Medicaid, which mot likely results in termination of participation. Understandably, Medicare and Medicaid do not want to pay for a provider’s services when he or she can not provide the full spectrum of care that includes prescribing controlled substances. Additionally, signing the form may trigger administrative and disciplinary action like civil monetary penalties or loss of medical staff privileges. Essentially, one signature has the potential to destroy a provider’s entire livelihood.

The DEA agent, of course, will do his or her level best to convince you that this is your best possible legal action. The DEA Agent’s intent is far from giving the provider the full story. The only advice that a provider should be accepting is legal advice from her or his attorney. When a provider confronts a DEA Agent, particularly in an unscheduled visit, the first thing a provider should do is contact an attorney before making any decisions as to how to proceed, whether the DEA is requesting consent to a search or a surrender of controlled substance prescribing privilege. Above all, do not sign anything without the advice your attorney. Tell the DEA Agent that you will have to consult with your attorney before signing any voluntary surrender or making any statements. The DEA Voluntary Surrender Form 104 is not a simple matter, whatsoever!

ARTICLE BY Lisa English Hinkle of McBrayer, McGinnis, Leslie and Kirkland, PLLC
© 2015 by McBrayer, McGinnis, Leslie & Kirkland, PLLC. All rights reserved.

How Does the King v. Burwell Decision Affect the Affordable Care Act?

The Supreme Court handed the Obama administration a key victory, upholding the tax credits that allow many low-income Americans to purchase health care insurance in states where the federal government is running the insurance marketplace. These tax credits, available to Americans with household incomes between 100% and 400% of the federal poverty line, operate as a form of premium assistance that subsidizes the purchase of health insurance.

The petitioners in King v. Burwell, No. 14-114 (U.S. June 25, 2015), challenged a ruling from the Internal Revenue Service (IRS) and claimed that a phrase in the Affordable Care Act (ACA) indicating that the subsidies are only available to consumers buying insurance in a state-run exchange prohibited the federal government from providing tax credits where states have not established their own exchanges. Arguing that the text of the law should be read literally, they challenged an IRS regulation that makes these tax credits available regardless of whether the exchange is run by a state or the federal government.

But the Supreme Court sided with the Obama administration in its 6-3 decision, emphasizing that language allowing tax credits for health insurance purchased on “an Exchange established by the State” must be interpreted in context and within the larger statutory scheme. Chief Justice Roberts, who authored the majority opinion, wrote that the phrase “an Exchange established by the State” was ambiguous, and therefore required the Court to look to the broader structure of the law. He wrote that the larger statutory scheme required the Court to reject the petitioners’ interpretation, which would have destabilized the individual insurance market and would create the exact same “death spirals” of rising premiums and declining availability of insurance that the law was crafted to avoid. In passing the law, he added, Congress sought “to improve health insurance markets, not to destroy them.”

The Supreme Court’s analysis went a step beyond the traditional framework used by courts to review agency actions. This two-step analysis, first announced in Chevron U.S.A. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) and widely known as the Chevrontwo-step, first considers whether the statutory language is clear—and if it is, the inquiry ends there. But if the language of the law is silent or ambiguous, a court next considers whether the agency’s interpretation of the statute is reasonable, granting considerable deference to the agency’s interpretation. Because the tax credits under the ACA are central to the reforms created by the law, Chief Justice Roberts explained, Congress would not have delegated such an important question to any agency, and especially not to the IRS, which lacks expertise in crafting health insurance policy. He wrote that in this case, the task of determining the correct reading of the statute belonged to the Court.

For most providers and companies involved in the health care system, the result of this decision means business as usual. But the decisive victory for the law today means that the ACA is here to stay, and will have a permanent effect on how patients access care. Insurers and providers still must overcome hurdles to achieve affordable premiums and provide improved care for patients across the country. And as more laws are sorted out in the courts, the Supreme Court’s reliance on context in interpreting the statute today could set an important precedent of emphasizing the purpose of major legislation when analyzing its trickier provisions.

ARTICLE BY Anna S. Ross of Foley & Lardner LLP

© 2015 Foley & Lardner LLP

Obamacare Survives in 6-3 Vote – Supreme Court Issues Opinion on King v. Burwell

This morning, the Supreme Court of the United States issued its final decision on King v. Burwell regarding the survival of Obamacare. The decision, issued by Chief Justice Roberts and joined by Justices Anthony Kennedy, Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan, effectively allows millions of people to to keep the tax subsidies provided so they can afford health insurance.

The Affordable Care Act (ACA) explicitly states that the tax subsidies were provided for individals to purchase insurance through state-based changes. The Court was charged with determining whether they could be used to purchase insurance through the federally run Healthcare.gov marketplace as well. The creators of the law contend that the law’s intent is to make affordable care available to people across the country through both channels by providing a federal exchange where states did not establish one.

The Court agreed -federal government can subsidize health insurance premiums for residents of states that did not establish a state health insurance exchange. In the Court’s opinion, Chief Justice Roberts wrote “The combination of no tax credits and an ineffective coverage requirement could well push a State’s individual insurance market into a death spiral… It is implausible that Congress meant the Act to operate in this manner.”

Chief Justice Roberts reinforces the role of the Court – as an interpreter of the law, not its creator:

[I]n every case we must respect the role of the Legislature, and take care not to undo what it has done. A fair reading of legislation demands a fair understanding of the legislative plan. Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter. (emphasis added)

This is a developing story. Please stay tuned for more updates and legal commentary.

SCOTUS Upholds Exchange Subsidies – King v. Burwell

Supreme Court Upholds Affordable Care Act Insurance Subsidies

Copyright ©2015 National Law Forum, LLC

June 24th – Healthcare Quarterly Update: Cybersecurity and Health Data Privacy by Bloomberg BNA

Washington, DC

Join Bloomberg BNA for this essential event that explores concerns relating to cyber-security and health data privacy. Healthcare industry experts Kirk Nahra and David Holtzman will join HHS’s Iliana Peters for a comprehensive examination of:
• Big data in the healthcare sector and how to protect information
• Protecting patient and organization information
• Federal enforcement of HIPAA Privacy, Security, Data Breach rules
• Practical up to date information on current issues
• And so much more.

Click here to register today!

Identify actionable issues, secure your organization, and earn CLE credits.

A breakfast panel with accomplished scholars and an HHS representative. This conversation will address practical considerations for ensuring that patient’s data is being properly handled in full compliance with all regulations and ethical responsibilities. Healthcare practitioners are increasingly required to address concerns of Data privacy and Cyber-security; attending this panel will assist you in identifying actionable points in the law common to many legal practices.

Healthcare Quarterly Update: Cybersecurity and Health Data Privacy by Bloomberg BNA

Washington, DC

Join Bloomberg BNA for this essential event that explores concerns relating to cyber-security and health data privacy. Healthcare industry experts Kirk Nahra and David Holtzman will join HHS’s Iliana Peters for a comprehensive examination of:
• Big data in the healthcare sector and how to protect information
• Protecting patient and organization information
• Federal enforcement of HIPAA Privacy, Security, Data Breach rules
• Practical up to date information on current issues
• And so much more.

Click here to register today!

Identify actionable issues, secure your organization, and earn CLE credits.

A breakfast panel with accomplished scholars and an HHS representative. This conversation will address practical considerations for ensuring that patient’s data is being properly handled in full compliance with all regulations and ethical responsibilities. Healthcare practitioners are increasingly required to address concerns of Data privacy and Cyber-security; attending this panel will assist you in identifying actionable points in the law common to many legal practices.

New Draft EMA-Guideline On Clinical Development Of Fixed Combination Medicines

The European Medicines Agency (EMA) has recently published for public consultation its draft guideline on clinical development of fixed combination medicinal products (Draft Guideline), which is intended to replace CHMP/EWP/240/95 Rev. 1 (Existing Guideline).  The Draft Guideline applies to fixed combination medicinal products containing two or more active substances within a single pharmaceutical form.  The active substances may be known active substances or substances that have yet to be authorised in the EU.

An EMA concept paper on the Existing Guideline suggested that it be revised in order to suppress regulatory aspects and restrict it to the scientific requirements for clinical development of fixed combination products.  The Draft Guideline therefore contains a number of changes from the Existing Guideline, including:

  • It no longer describes the applicable legal basis for approving marketing authorisation applications for fixed combination products. The Existing Guideline places a strong link between Article 10b of Directive 2001/83/EC and the development of fixed combination products.  However, the Draft Guideline provides that “The legal basis for applications concerning fixed combination medicinal products may vary depending on the particularities of the active substances in combination and the development undertaken.  The choice of legal basis lies with the applicant…”  The Draft Guideline, as is the case with the Existing Guideline, does not discuss data exclusivity in respect of fixed combination products.  The European Commission’s guidance contained in its Notice to Applicants, Volume 2 A continues to apply in this regard.  It is worth noting that Teva has recently withdrawn its application and has discontinued proceedings in litigation before the General Court of the European Union (Case T-547/12) concerning regulatory data exclusivity for fixed combination products.

  • The Draft Guideline no longer addresses requirements for combination packs (i.e., where active substances are included in separate pharmaceutical forms marketed in the same package). The Existing Guideline states that scientific principles applicable to fixed combination products will also be applied in the assessment of combination pack medicinal products.  However, the EMA has subsequently recognised that from a regulatory point of view combination packs are not the same as fixed-dose combinations.  As such, reference to combination packs has been removed from the Draft Guideline.

  • The Draft Guideline contains more detail on the scientific aspects relevant for approval of fixed combination products. In summary, it provides that the basic requirements for a marketing authorisation application for a fixed combination product are: (1) justification of the pharmacological and medical rationale for the combination, (2) establishment of the evidence base for the: (a) relevant contribution of all active components to the desired therapeutic effect; and (b) positive risk-benefit for the combination, and (3) verification that the evidence base presented is relevant to the product applied for.

The deadline for submitting comments on the Draft Guideline is 15 November 2015.  Comments should be sent to FDCguideline@ema.europa.eu, and should be submitted using this template.

ARTICLE BY Sarah Cowlishaw of Covington & Burling LLP
© 2015 Covington & Burling LLP