Tag: Health Law

Government Shutdown Now Over – But What About Sequestration?

DrinkerBiddle

The government may be back up and running and funded under a short-term continuing resolution (CR), but the battle is far from over as Congress heads toward new deadlines to address budgetary matters.  There has been some confusion about what the current budget agreement means in terms of sequestration’s annual cuts to discretionary and mandatory programs instituted in 2012.  The law signed by the President to address the short-term continuing resolution and temporarily raise the debt ceiling does not provide federal agencies flexibility to administer new sequestration cuts at this time.  With the government spending levels remaining at FY 2013 levels for the duration of the CR, a new round of sequester cuts are not set to kick in until January 2014.

The law established a short-term budget conference committee, with a set deadline of Dec. 13, 2013 to outline recommended spending levels and program cuts.  Of note is that the committee deadline is set in advance of when the second year of the sequester will begin.  The deadline provides a window of opportunity for the new budget conferees to address how the sequester cuts are applied in FY 2014.   The conferees may contemplate making other adjustments to entitlement programs (Medicare and Medicaid) to address health care spending issues that will be negotiated during their deliberations.  In addition, Medicare payments to physicians are set to be cut by approximately 25 percent if Congress does not address the cut by December 31, 2013 and offset the cut with a payfor that would likely include cuts to other health care entities. Any of these negotiations and decisions, if ultimately accepted by Congress, could impact the size of the Medicare sequester cuts in January FY 2014.

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Government Shutdown Aftermath: Centers for Medicare & Medicaid Services (CMS) Under Pressure to Finalize Medicare Payment Rules

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  • Because of the prolonged government shutdown, the Centers for Medicare & Medicaid Services (CMS) may encounter delays in promulgating final payment rules that would otherwise be effective January 1, 2014.
  • It is reasonable to expect that CMS will miss the November 1, 2013 statutory deadline to publish final rules due to the staff shortage from the shutdown as well as the complexity of many significant rule changes that were proposed earlier this year.
  • There is precedent for delaying the effective date of an entire payment rule to allow for the proper 60-day notice and comment period, and there are cases where only portions of a rule that represent significant changes have been delayed.
  • Providers should assess whether CMS has taken the requisite time to properly account for stakeholder input through the comment process, and, if not, they should identify possible remedies.

Despite the short-term resolution to the government budget and debt-ceiling “crisis,” health care providers serving approximately 50 million Medicare beneficiaries may be waiting longer than usual this year to see what rates they will be paid in 2014 as a result of the government shutdown. Any delay is likely to cause great angst amongst providers, including physicians, hospitals, laboratories, and post-acute care facilities such as home health agencies, whose livelihood depends to a significant degree on the terms of annual reimbursement rules. These include the Physician Fee Schedule (PFS), the Hospital Outpatient Prospective Payment System (HOPPS), the Clinical Laboratory Fee Schedule (CLFS) and the Home Health Prospective Payment System (HHPPS).

As we noted prior to the government shutdown, over three quarters of the staff at CMS, the federal agency that administers the Medicare and Medicaid programs, are subject to a furlough. Most of the remaining staff are funded through non-annual discretionary appropriations, such as those who are working to implement the health care marketplaces under the Affordable Care Act. Therefore, even though the government reopened on October 17, 2013, the likelihood that CMS and other executive branch offices will finalize a series of important 2014 Medicare payment rules by the November 1st statutory deadline is becoming increasingly doubtful.

Much depends on the progress executive branch officials had already made on specific payment rules before the shutdown, on how fast staff are able to ramp up now that it is over (for the time being), and on competing priorities and deadlines for the Administration. Adding to the complexity of finalizing the payment rules this year, CMS had proposed numerous significant changes that could greatly impact reimbursement for calendar year 2014. Some of the most significant changes that were proposed in earlier rulemaking include:

Home Health Prospective Payment System
  • Responding to this proposed rule, industry stakeholders have been vocal in their concerns over portions of the proposed rule, which imposes a 14% reduction in Medicare home health funding by means of the maximum allowable rebasing adjustment of 3.5% each year from 2014 to 2017. In comments submitted to the agency, numerous stakeholders from the home health sector specified methodological flaws in the rule including that it was drafted using outdated data and the wrong base year; its impact was only analyzed for 2014 even though it applies to 2014-2017; and that it failed to include an adequate small business impact analysis per the Regulatory Flexibility Act – in fact, the Small Business Administration has expressed concern with the proposed HHPPS rule.
Hospital Outpatient Prospective Payment System
  • Collapsing Outpatient Visits: Collapsing 20 hospital clinic visits, Type A emergency department (ED) and Type B ED visit codes into 3 new codes – one for each type of visit.
  • Packaging: Identifying seven new categories of items and services whose costs will be packaged into payment for other services to which they are integral, ancillary or supportive, including, among others, radiation oncology, clinical diagnostic laboratory tests, and drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure.
  • New Cost Centers: Using distinct cost-to-charge ratios (CCRs) for cardiac catheterizations, CT scans and MRIs to calculate OPPS payment weights – a change which represents significant cuts to CT and MRI reimbursement (approx. 26% and 11%, respectively).
Clinical Laboratory Fee Schedule
  • New National Limitation Amounts (NLAs) that will govern reimbursement for over 100 tier 1 molecular pathology codes, covering genetic testing ranging from cancers to rare diseases such as cystic fibrosis.
Physician Fee Schedule
  • Cuts in reimbursement for independent laboratories (-26%), radiation therapy centers (-13%), diagnostic testing facilities (-7%), radiation oncology (-5%), pathology (-5%), and interventional radiology (-4%), among others.
  • Capping for certain services in the PFS at the Outpatient Prospective Payment System (OPPS) or Ambulatory Surgical Center (ASC) rates for 2013.
  • Revisions to the Medicare Economic Index (MEI) that could cut reimbursement for diagnostic testing facilities, portable x-ray suppliers, and radiation therapy centers.

Legal Background for Payment Rule Timing

Various laws and executive orders govern when a Medicare payment rule must be posted for public comment, the required length of time of the notice and comment process, and when the final rule is to become effective.

The Administrative Procedure Act (APA) normally requires a 30-day delay in the effective date of a rule. Furthermore, the Congressional Review Act (CRA) generally requires an agency to delay the effective date of a major rule by 60 days in order to allow for congressional review of the agency action. Finally, in order to receive the proper stakeholder input, the Paperwork Reduction Act (PRA) requires CMS to provide a 60-day notice and comment period before promulgating a rule. Thus, CMS has a statutory deadline of November 1, 2013 if it wants to have an effective date of January 1, 2014 for a Medicare payment rule.

A comment period of at least 60 days is the default under Executive Order 12866, § 6(a)(1) (Sept. 30, 1993), Regulatory Planning and Review, as amended by Exec. Orders 13258 (Feb. 26, 2002) and 13422 (Jan. 18, 2007) (providing that “each agency should afford the public a meaningful opportunity to comment on any proposed regulation, which in most cases should include a comment period of not less than 60 days”).

If CMS finds good cause to waive the delay in the effective date of a final rule because the delay is unnecessary, impractical, or contrary to the public’s interest, or the statute permits waiving the delay, the final rule may become effective upon publication.

A History of Delays

CMS regularly misses the November 1 deadline, and in some cases the final rule is published in late November. In certain instances, CMS has delayed the effective date of a payment rule to account for the 60-day notice and comment period as well as the 30-day minimum effective date requirement. For example, for the CY 2003 PFS, CMS delayed the effective date from January 1 to March 3 after publishing the final rule on December 31, 2002. During the last government shutdown in 1995, CMS published the CY 1996 PFS on December 8th and retained an effective date of January 1, 1996 for the overall rule, but extended comments for new or revised payment codes until Feb 6th. The agency has used similar processes for other payment rules, such as the CY 2008 HOPPS rule that extended the comment period until the end of January for certain codes that were significantly changed.

Recent history seems to indicate that if the rules are delayed into December, there is a small, albeit infrequently used, possibility that rules/codes that are significantly changed may have a delayed comment and effective date. However, CMS has also ignored such deadlines in the past and, through a variety of methods, has been able to justify shorter notice and comment periods and effective dates less than 60 days from original publication.

Conclusion

It is reasonable to believe that due to the government shutdown and ensuing staff shortage, CMS could incur significant delays in publishing Medicare final payment rules, in some cases until well after the “standard” statutory November 1st deadline. While CMS has extended notice/comment periods and effective dates, it has done so rarely and only when delays relate to significant substantive changes made in the rules. Because a series of complex and economically significant changes to reimbursement rates and rules has been proposed for 2014, stakeholders should work to ensure that CMS provides adequate time for consideration of industry input via notice and comment in compliance with the spirit and letter of the law.

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New Employee Wellness Program Rules for 2014

Poyner Spruill

Employers continue to look for ways to manage the cost of employee health care coverage as they navigate the turbulent waters of healthcare reform, and wellness programs continue to be a popular strategy.  However, adoption and expansion of these programs have been hampered somewhat by questions about their effectiveness, cost, and the risk of noncompliance with the uncoordinated web of laws and regulations governing these programs.  While evidence seems to be emerging that at least some wellness program designs can be an effective means for cost control and long-term savings due to improved health, recently issued final regulations under the Health Insurance Portability and Accountability Act (HIPAA) effective beginning in 2014 only add additional burdens to employers’ compliance efforts.

HIPAA amended ERISA to generally prohibit discrimination against individual participants and beneficiaries in eligibility, benefits or premiums based on “health status-related factors,” including physical and mental illnesses, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, and disability.  However, under the wellness program exception to HIPAA group health plans may offer premium discounts, rebates, reduced co-payments and/or lower deductibles (generally referred to as ‘rewards’) to participants and beneficiaries who take part in “programs of health promotion and disease prevention.”

The final HIPAA nondiscrimination regulations, effective for plan years beginning after 2013, create two categories of programs under the wellness program exception: ‘participatory wellness programs’ and ‘health-contingent wellness programs.’

Participatory wellness programs either provide no reward  or do not condition a reward on the achievement of a health standard.  Examples of participatory wellness programs include:

  • Reimbursing all or part of the cost of a fitness center membership;
  • Reimbursing costs of participation or rewarding participation in a smoking cessation program regardless of whether the individual quits smoking; and
  • Rewarding participation in a no-cost health education seminar, a health risk assessment, or a diagnostic testing program, regardless of outcomes and without requirement for further actions.

A participatory wellness program must be available to all similarly situated individuals regardless of health status, but otherwise is not required to comply with the more strenuous requirements applicable to health-contingent wellness programs.

Health-contingent wellness programs require an individual to satisfy a standard related to a health factor to obtain a reward or require an individual to undertake more than a similarly situated individual based on a health factor in order to receive the same reward.  Health-contingent wellness programs are divided into two subcategories: ‘activity-only wellness programs’ and ‘outcome-based wellness programs.’

Activity-only wellness programs require an individual to perform or complete an activity related to a health factor in order to obtain a reward, but do not require the individual to attain or maintain a specific health outcome.  Examples of activity-only wellness programs include walking, diet, or exercise programs.  If an individual cannot participate in the activity due to a health factor, then a reasonable alternative (or waiver of the otherwise applicable standard) must be provided in order to qualify for the reward.

Outcome-based wellness programs require an individual either to attain a specific health standard or complete an activity or other requirement related to the health factor in order to obtain a reward.  These programs usually have two tiers: a measurement, test or screening, followed by a program that targets individuals who do not meet a pre-specified standard.  Examples of outcome-based wellness programs include:

  • Reward for non-tobacco use, or participate in a tobacco use cessation program; and
  • Reward for cholesterol, blood pressure or body mass index below a specified level, or take additional steps, such as complying with a prescribed plan of care or participating in a exercise program.

An individual who does not meet the specified health standard must be provided a reasonable alternative (or waiver of the otherwise applicable standard) in order to qualify for the reward.

Both activity-only wellness programs and outcome-based wellness programs must satisfy the following five additional requirements:

  • Individuals eligible for the program must be given the opportunity to qualify for the reward at least once per year.
  • The size of the reward(s) under all health-contingent wellness programs is limited to a maximum of 30% (50% for tobacco nonuse/cessation programs) of the total cost of elected coverage.
  • The program has a reasonable chance of improving the health of, or preventing disease in, participating individuals, is not overly burdensome, is not a subterfuge for discrimination based on a health factor, and is not highly suspect in the method chosen to promote health or prevent disease.
  • The full reward must be available to all similarly situated individuals and, as previously discussed, a reasonable alternative must be provided for obtaining a reward.   The plan is permitted to seek verification from the individual’s physician only that a health factor makes it unreasonably difficult or medically inadvisable for the individual to participate in an activity, and not whether the individual can satisfy a specified health standard.  Alternatives do not have to be determined in advance but must be provided upon request within a reasonable time.
  • Notice of the availability of a reasonable alternative must be provided in all plan materials that describe the terms of the health-contingent wellness program, and include contact information for obtaining the alternative and a statement that recommendations of an individual’s personal physician will be accommodated.

Add to these new rules the alphabet soup of other rules that impact wellness programs, including HIPAA privacy and security, GINA, ADA, ADEA, Title VII, FLSA, and COBRA, and it becomes clear that plan sponsors would be well-served to have even the most seemingly simple program reviewed by legal counsel for compliance.

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Update on Government Shutdown's Impact on Trade

Katten Muchin

The ongoing federal government shutdown is impacting a wide variety of import and export trade activities. While the situation remains fluid as each agency executes its contingency plans, below is a summary of the current impact on trade.

Customs and Border Protection (CBP): The majority of CBP employees are exempt from the furlough as being deemed essential to the country’s security. Most of those exemptions are related to the agency’s ongoing revenue collections. Currently, ports are maintaining their normal hours of service. CBP also seems to be accepting and processing protests, although with some delays. However, CBP appears to have stopped processing ruling requests or responding to any court documents due to the shutdown. Among the CBP personnel not exempted from furlough are technicians and program managers. As a result, certain additional CBP activities, such as bonds and licensing and processing FDA refusals, may also be impacted.

Food and Drug Administration (FDA): FDA continues to perform entry review and to address high-risk recalls, civil and criminal investigations, and other critical public health issues. However, FDA has furloughed personnel as well, resulting in entry review delays. The agency is giving priority to perishable entries, defined as merchandise expiring within 30 days, and to any lifesaving medical product. The agency has generally ceased routine establishment inspections, monitoring of imports, notification programs such as those involving food contact substances and import formula, and its laboratory research activities.

International Trade Commission (ITC): ITC has shut down its investigative activities, including antidumping and countervailing injury investigations and reviews, and intellectual property rights infringement investigations and ancillary proceedings. The schedules and deadlines for all investigative and pre-institution activities are being tolled and all hearings and conferences have been postponed. In addition, ITC’s website is down, so information such as the online Harmonized Tariff Schedule is not available.

International Trade Administration (ITA): ITA’s website—including the online steel licensing system—is down. The agency recommends sending an email to steel.license@trade.gov for manual processing of license requests for shipments that do not have a steel license. Enforcement and Compliance (formerly, Import Administration) intends to uniformly toll all administrative deadlines related to the administration of US antidumping and countervailing duty laws for the duration of the shutdown. These include deadlines for preliminary and final determinations in antidumping and countervailing duty investigations and administrative reviews and deadlines for all actions by parties to these proceedings.

Bureau of Industry and Security (BIS): BIS is no longer accepting advisory opinion requests, classification requests (CCATS), encryption reviews, encryption registrations or export license applications. Similarly, BIS will not issue any final determinations. The SNAP-R application on BIS’s website is not available and will not reopen until the shutdown ends. All pending export license applications, commodity classification requests, encryption reviews, encryption registrations and advisory opinion requests will be held without action by BIS until the shutdown ends. Applicants may request emergency processing of export license applications for national security reasons.

Department of Agriculture (USDA): USDA’s website is down. The Animal and Plant Health Inspection Service (APHIS) is operating in the ports, but personnel will not be available for the renewal and authorization of notifications or permits.

Alcohol and Tobacco Tax and Trade Bureau (ATTTB): ATTTB has halted its regulatory functions, noncriminal investigative activities and audit functions. But it will ensure that all tax remittances are processed because these functions have been deemed necessary for safety and protection of property.

As Congress continues to debate the necessary appropriations to fund the government’s operations, the trade community should expect further impact on trade operations.

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Action Steps NOW To Comply With The Affordable Care Act

Womble Carlyle

Although the one-year delay in the effective date of the pay-or-play provisions of the Affordable Care Act (“ACA”) (until January 1, 2015) gives employer-sponsored health plans more time to prepare for those requirements, many ACA provisions will take effect on January 1, 2014. Employees are asking for information regarding these changes and the Department of Labor is already including ACA requirements in its benefit plan audits. The target keeps moving. Here is what you need to do NOW to ensure that your health plan is in compliance on January 1, 2014 and that you are prepared for what’s coming: 

  • Distribute the required Notice informing your employees about their coverage options by October 1, 2013 and to all new hires after October 1, 2013.
  • Determine if your plan will have “grandfathered” status in 2014.
  • Confirm that required plan design changes are in effect for 2014, including:
  • Elimination of annual limit on essential health benefits.
  • Elimination of pre-existing condition exclusions for new enrollees.
  • Limiting waiting period for enrollment to 90 days.
  • Elimination of restrictions related to participation in clinical trials (non-grandfathered plans only).
  • Conform cost-sharing provisions to ACA requirements (non-grandfathered plans only).
  • Provide coverage for ACA “essential benefit” categories (insured plans in individual and small group markets only).
  • Timely provide updated Summaries of Benefits & Coverage.
  • Develop strategies on how to use the rest of 2013 and 2014 to plan for ACA provisions that will go into effect in 2015, including (1) pay-or-play provisions, such as determination or confirmation of applicable larger-employer status and how to determine full-time employee status; and (2) reporting requirements.
  • Consider alternative options to continuing to provide health care coverage for your various categories of employees.
  • Implement cafeteria plan changes related to ACA and repeal of DOMA.
  • Bring wellness programs into compliance with ACA.
  • Prepare to pay ACA reinsurance fees (self-insured plans only).
  • Make sure you are complying with the final HIPAA rules concerning “protected health information” that went into effect on September 23, 2013.

The Government Shut Down and Its Impact on Public Health

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In the early morning of October 1, 2013, the U.S. federal government officially went dark. The shutdown came in the aftermath of the Senate’s decisive vote to reject a House plan that would have kept the government funded for several more months but delayed implementation of key portions of the Affordable Care Act (ACA) for one year.

The impact of the shutdown will be felt across all healthcare sectors as many federal employees face furloughs of unknown duration. In particular, the Department of Health and Human Services (HHS) announced in its Contingency Staffing Plan that over half of its employees will be furloughed. HHS’s Plan is based upon federal guidance that allows agency programs to continue only if they either do not rely on annual appropriations, or they involve the safety of human life or the protection of property.[1] According to HHS, the following programs and services will continue:

  • Funding for Medicaid and the Child Health Insurance Program will continue uninterrupted because funding has already been set aside for these programs.
  • Funding for Medicare will likewise continue uninterrupted but only in the short term. If the political impasse stretches beyond several weeks, the program could be disrupted by the reduction in HHS staff.
  • The Centers for Medicare & Medicaid Services (CMS) will continue to implement the ACA, “including coordination between Medicaid and the Marketplace, as well as insurance rate reviews, and assessment of a portion of insurance premiums that are used on medical services.”[2]
  • State and federal health insurance exchange programs will open as planned, though it is not clear how the information technology (IT) that underpins the exchanges will function since they are operated by government contractors.[3]
  • The National Institute of Health (NIH) will continue to provide patient care for current NIH Clinical Center[4] patients
  • The Food and Drug Administration (FDA) will be able to operate only for “vital activities” such as high risk recalls and other “critical public health issues.”
  • Substance Abuse and Mental Health Services Administration will continue programs such as the Suicide Prevention Lifeline using the balance of available grants.
  • Other programs supported through mandatory funding such as the Centers for Disease Control and Prevention (CDC) Global HIV/AIDS Program will continue.

However, several programs important to public health will be disrupted if a congressional compromise cannot soon be reached. For example:

  • Outside of matters related to “imminent threats to the safety of human life or protection of property,” CMS, FDA, NIH and other federal agencies will not publish regulations or other guidance during the shutdown.
  • CMS will not fund task forces that work to prevent healthcare fraud and abuse, and will scale back on Medicare provider audits.
  • The CDC seasonal influenza program, which tracks flu outbreaks and certain infectious diseases, will come to a halt.
  • No new patients will be admitted to the NIH Clinical Center. NIH-funded researchers may continue to work for as long as their money holds out but additional funds will not be released during the shutdown.
  • The FDA will not be able to support much of its food safety activities, such as routine inspections and public notification programs. The FDA’s laboratory research and some compliance and enforcement activities will be suspended.
  • No action will be taken on any grants related to medical research, improvement of the healthcare system, and monitoring of substance abuse programs.

Although providers can take comfort in the fact that Medicare and Medicaid program reimbursement will proceed, a government shutdown for any period of time beyond three or four weeks could impede certain critical administrative functions, such as Medicare claims processing, and therefore impact their pocketbooks. Likewise, while substantial ACA implementation will continue, long term furloughs could affect certain components of the law (such as the exchanges) because they depend on government employees to help run the IT component, among other aspects of the program. Thus, the magnitude of the shutdown’s impact will depend on how long it endures.

*Copyright 2013, American Health Lawyers Association, Washington, DC. Reprint permission granted.

[1]/ Opinion of the Office of Legal Counsel, Department of Justice, Government Operations in the Event of a Lapse in Appropriations, 1995 WL 17216091 (Aug.16, 1995) at pp. 3-4: see also, Effect of Appropriations for Other Agencies and Branches on the Authority to Continue Department of Justice Functions During the Lapse in the Department’s Appropriations, 19 Op. O.L.C. 337, 1995 WL 917146 (Dec. 13, 1995).

[2]/ Contingency Staffing Plan, pp.2-3.

[3]/ CMS has not publicly stated whether the IT contracts are already issued and funded.

[4]/ The NIH Clinical Center is the agency’s research hospital.

Federal Government Shutdown

DrinkerBiddle

For the first time in 17 years, the federal government has officially shutdown.  Late last night, the Administration released a memo to all federal agencies advising them to execute their contingency plans (an agency-by-agency list is available here).

Yesterday the Senate passed a bill that would fund the government through November 15, 2013, but would make no changes to the Affordable Care Act (ACA).  (More information on the Senate vote is available here.)  Last night, by a vote of 228-201, the House passed legislation that would keep the government open through December 15, 2013, but would delay the ACA’s individual mandate requirement and would eliminate health insurance subsidies for Members of Congress, Congressional staff, the President, the Vice President, and political appointees.  By a vote of 54-46 the Senate voted to table, or kill, the legislation.

Following the latest Senate action, the House voted to formally request a conference committee with the Senate.  (Conference committees are joint House-Senate committees that are created to resolve disagreements between the House and Senate versions of a given bill.)  House Speaker Boehner (R-OH) appointed the following members to the conference committee:  House Majority Leader Cantor (R-VA-7), Ways and Means Chairman Camp (R-MI-4), House Budget Committee Chairman Ryan (R-WI-1), House Appropriations Chairman Rogers (R-KY-5), Representative Frelinghuysen (R-NJ-11), Representative Crenshaw (R-FL-4), Representative Carter (R-TX-31), and Representative Graves (R-GA-14).  House Democrats have not appointed conferees.  The Senate voted to table the request for conferees.

While the House and Senate cannot seem to agree on terms to fund the entire government, both chambers have passed H.R. 3210, legislation that would provide payment through the government shutdown for members of the Armed Forces (including reserve personnel) and civilian Department of Defense (DoD) employees and contractors whom the DoD Secretary determines are providing support to members of the Armed Forces.  The legislation passed the House by a unanimous vote, the Senate passed the bill by a voice vote, and was signed into law by President Obama last night.

At this point, both the House and the Senate appear at a stalemate.  Until Members of Congress can reach some agreement, the government shutdown will remain in place.  We will continue to update this blog as events unfold.

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Centers for Medicare & Medicaid (CMS) Delays Auditing of “Two-Midnight” Rule

vonBriesen

The Centers for Medicare & Medicaid (CMS) announced this week it will delay Recovery Audit Contractor (RAC) audits of the “two-midnight” rule for 90 days. The 2014 Inpatient Prospective Payment System Final Rule, released in August 2013, finalized the “two-midnight” rule, under which hospital inpatient admissions that span at least two midnights presumptively qualify as appropriate under Medicare Part A, and hospital inpatient admissions that span less than two midnights (i.e., less than one Medicare utilization day) are presumptively inappropriate for payment under Part A.  When auditing medical necessity, the RACs would presume that the occurrence of 2 midnights after formal inpatient hospital admission indicates an appropriate in patient status for a medically necessary claim. If the occurrence of 2 midnights after formal inpatient hospital admission does not occur, government recovery auditors do not apply the same presumption and claims for such admissions receive a higher level of scrutiny.

As part of its announcement, CMS stated it will not, for a period of 90 days, permit government recovery auditors to review the medical necessity of inpatient admissions of one midnight or less between October 1, 2013 and December 31, 2013.

CMS’ frequently asked questions with its announcement can be found here.

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Diagnostic Laboratories Settles for $17.5 Million After Healthcare Whistleblowers’ Allegations of Medicare Fraud

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The Department of Justice announced yesterday that Diagnostic Laboratories and Radiology, the West Coast’s largest supplier of laboratory and X-ray services to nursing homes, will pay $17.5 million to settle whistleblower allegations that the California-based company violated the False Claims Act by giving kickbacks for referral of mobile lab and radiology services, which were subsequently billed to Medicare and Medi-Cal (California’s Medicaid program).  Diagnostic Labs allegedly took advantage of Medicare’s and Medi-Cal’s reimbursement systems by billing them at standard rates while secretly giving discounted fees to the participating nursing homes. According to the lawsuit, those fees were as much as 80 percent below the lab’s normal rates.

For inpatients, Medicare pays a fixed rate based on the patient’s diagnosis, regardless of specific services provided.  For outpatients, Medicare pays for each service separately.  Diagnostic Labs’ scheme supposedly enabled the nursing homes to maximize their profits for providing inpatient services by decreasing the cost of them.  It also allegedly allowed Diagnostic Labs to obtain a steady stream of lucrative, outpatient referrals that it could directly bill to Medicare and Medi-Cal.  This provision of inducements, including giving discounted rates to generate referrals, is prohibited by both federal and state law. By law, the discounts should have been passed along to the government programs.

The Medicare whistleblowers in this case were two former Diagnostic Lab employees, Jon Pasqua and Jeff Hauser, who said they were fired after reporting the secret discounts and kickbacks to the authorities. Hauser and Pasqua worked in the company’s sales office and said they tried to report the questionable discount practices to supervisors first, but were ignored. They then provided information to state and federal officials, and were subsequently fired from their jobs shortly before filing the healthcare fraud case in February 2010, according to their lawyers.

This settlement will resolve Hauser and Pasqua’s lawsuit, which was filed under the qui tam, or whistleblower, provisions of the federal and state False Claims Act. This act allows private citizens with knowledge of fraud to bring qui tam lawsuits on behalf of the US government. The individual filing the lawsuit is known as the relator, or whistleblower.  Healthcare whistleblowers, such as Hauser and Pasqua, serve an important role in exposing and eliminating healthcare fraud.

While it is true that whistleblowers take on a personal risk in these cases, it is still worthwhile for them to come forward with their information. Because qui tam whistleblowers help to eliminate government fraud, they receive a significant proportion of the lawsuit’s settlement for their efforts.

Together, Pasqua and Hauser will receive a total $3,755,500 as their share of the federal government’s recovery.

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Health Care Exchange Notices Required by October 1, 2013; However No Penalty for Not Providing

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The Affordable Care Act requires that employers provide employees with notice (Notice) about the health care exchanges (the federal government also refers to these as “marketplaces”). Nevertheless, some confusion prevails about what is actually required.

Employers Subject to the Notice Requirement

The Notice must be provided by all employers to which the Fair Labor Standards Act (FLSA) applies. In general, the FLSA applies to employers that have one or more employees who are engaged in, or produce goods for, interstate commerce. For most companies, a test of not less than $500,000 in annual dollar volume of business applies. However, the FLSA also specifically covers the following entities: hospitals; institutions primarily engaged in care of the sick, aged, mentally ill, or disabled who reside on the premises; schools for children who are mentally or physically disabled or gifted; preschools, elementary, and secondary schools and institutions of higher education; and federal, state and local government agencies. In addition, the FLSA will apply where an employee is engaged in interstate commerce, even if the activities do not rise to the requisite volume of business. Consequently, nearly all employers will be subject to the FLSA and, therefore, the Notice requirement.

Those who must receive the Notice are all employees of the employer, regardless of whether the employee is even eligible for the employer’s health plan.

When Must the Notice Be Provided?

The Notice must be given to all current employees by October 1, 2013. Individuals who begin employment after October 1, 2013 must be given the Notice within 14 days of their hire date. The Notice can be distributed to employees by first class mail or electronically, provided that the employer can meet Employee Retirement Income Security Act’s (ERISA) requirement for distribution of electronic notices (generally, this means that the employee has either consented to the electronic notice or utilizes a company computer as an essential function of their job).

What the Notice Must Include

Pursuant to the statute, the Notice must inform the employee of the existence of the health care exchange, describe the services the exchange provides, and how the employee can contact the exchange. In addition, the Notice must advise the employee that he or she may be eligible for a premium tax credit if the total allowed costs of benefits provided under the employer’s plan is less than 60 percent of such costs, that an employee who purchases exchange coverage may lose the employer’s contribution toward the cost of coverage and that the employee’s payment for exchange coverage will be on an after-tax basis.

The Department of Labor (DOL) has provided a model Notice for employers who offer health insurance and one for employers who do not offer health insurance to employees. The model Notices can be found here. Both model Notices go beyond the scope of the information an employer is required to disclose pursuant to the Affordable Care Act.

Employees Seeking Exchange Coverage Will Need Employer Information

Starting in early October when the insurance exchanges are supposed to “turn on,” employees seeking information about exchange coverage will need information about any coverage the employer offers. Employers are obligated by law to engage in that discussion and provide information. For example, a low income employee who is offered coverage by his employer may still be interested in seeing if alternative coverage is available from the insurance exchange that, when subsidized by tax credits, may be a better choice for the employee.

The model Notice for employers that offer coverage contains a Part B with boxes for the employer to check and lines to complete in which information about the employer’s plan is provided. Still further information can be provided on an optional page. Depending upon the employer’s circumstances, we have recommended edits to ease the administrative burden, to limit confusion by employees, to increase accuracy based on the employer’s own circumstances, and other changes.

No Fine for Failing to Provide Exchange Notices

On September 11, 2013, the DOL announced it will not impose a penalty on employers who do not distribute the Notice. Nevertheless, we recommend that Notice be given. The media has publicized this obligation such that employees who expect to receive the Notice but do not, may inquire or complain. Furthermore, while no penalty is currently imposed, the Notice is “required” and future guidance is likely to presume it has been given. It is also possible that future guidance will be issued that does impose the penalty for future failures to provide it. We believe the better approach in most situations is to provide the Notice, modifying it if necessary based on the employer’s own circumstances.

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