News / Resources

Topics covered in this issue of the Health Law Update include:

• CMS Open Door Forum on Accountable Care Organizations—CMS Wants Your Feedback!
• Three-Day Payment Window Clarified
• Court Finds No Federal Peer Review Privilege
• I Love You!!—Government Employee Work Pagers Subject to Employer Scrutiny
• Events Calendar

CMS OPEN DOOR FORUM ON ACCOUNTABLE CARE ORGANIZATIONS—CMS WANTS YOUR FEEDBACK!

On June 24, 2010, the Centers for Medicare and Medicaid Services (CMS) hosted its first Open Door Forum on the creation of Accountable Care Organizations (ACOs), a reference to the shared savings provision contained within the Patient Protection and Affordable Care Act (PPACA). The purpose for the forum was less about CMS sharing its sense of how the regulations will be structured, with little additional information coming from CMS, but rather geared completely to obtaining public feedback.

CMS seemed far from being in a position to advise the public, even though regulations are anticipated this fall, and the program is anticipated to be formally initiated by January 1, 2012. Consequently, providers now are concerned with identifying what actions should be taken to allow them to qualify to receive the shared savings bonuses, which will be tied to the achievement of specific quality and efficiency standards that are yet to be determined.

The commentary and questions by entities around the nation were instructive, in and of themselves, and began to highlight for CMS the legal and practical barriers that must be addressed to assure success.

Hospital systems and trade associations highlighted the need for flexibility in the creation of ACOs, requesting minimal reporting burdens and encouraging the rapid receipt of bonus payments at the shared savings governance level, as contemplated by the statute. Several comments expressed concern over how shared savings would accrue and be distributed, indicating that the more the proverbial “bonus pie” was sliced, the more difficult it would be to attract hospitals and health systems to expend the resources needed to eventually recoup their investment.

Comments also cautioned that data transmission be transparent and rapid, including the assignment of beneficiaries to providers and assuring that each entity knows who it is “accountable” for, in terms of beneficiary status, acknowledging that some of the demonstration projects conducted by CMS ran on “assignments” that may not have been with the advance knowledge of the provider. Existing CMS demonstration projects proved that data transmission was slow, which hindered the eventual success.

Additionally, stakeholders implored CMS to coordinate with the Office of Inspector General (OIG) to assure that anti-kickback, Stark and other civil monetary penalty statute restrictions be relaxed to accomplish the intended goals of the shared savings programs. There was a specific request for CMS to obtain waivers from OIG and the U.S. Department of Justice, as well as the Federal Trade Commission for further guidance on antitrust restrictions that might impede the creation of the shared savings programs desired. We have previously discussed the need for the relaxation and provision of additional legal guidance as hospitals and physicians move forward to create new legal structures necessary to form ACOs. See the June 24, 2010, issue of the Health Law Update.

In a déjà vu moment, providers sounded the old managed care mantra relating to obtaining clear guidance on program design: closed networks, penalties associated with out-of-network care, elimination of the “any willing provider” concept in ACOs and incentives for beneficiaries to stay in-ACO by reducing co-payments and instituting other discounts to close the network. Additionally, there was a call for joint accountability between physicians and hospitals. Clear guidance regarding the program design will be essential to ensure the workability of the shared savings model and to guarantee that providers have the tools to achieve quality benchmarks and cost savings.

While the agency did not comment, CMS officials on the call indicated that a public website would be available for individuals to provide additional comments. It was clear that CMS wishes to obtain further guidance on the following issues:

• How to encourage clinical staff to develop and lead ACOs?
• How to measure quality?
• How to establish appropriate benchmarks?
• What tools and technology should be used in the development of ACOs?
• What beneficiary protections should be included in the development of ACOs?

Although the healthcare industry is left to surmise how a shared savings model ultimately will be constructed, venues like the CMS Open Door Forum offer a window into issues considered problematic by the industry and the anticipated struggles associated with creating/positioning entities that receive a shared savings bonus. Additionally, it is essential that healthcare providers understand and become active in the development of the quality measurement standards upon which the shared savings bonus payments will be based to assure that all issues are appropriately considered in various settings.

As other colleagues have correctly noted, it is imperative that the shared savings model be successful. These delivery system reforms were the only solutions proposed that were intended to “bend the cost curve,” and they all were proposed in the form of further demonstration projects. Many believe that these models will form the basis for CMS cost containment and, as such, it is crucial that the provider community participate in the development of the process to help assure their success and control their future.

While the Open Door Forum provided little advice for the practitioner or provider, what was clear was that the provider community needs to take control of its destiny and identify what it believes will work and what changes must be made to assure the model’s success.

For more information, please contact Susan Feigin Harris, or 713.646.1307.

THREE-DAY PAYMENT WINDOW CLARIFIED

On June 25, 2010, President Obama signed the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010. Among other provisions of this law, Congress effectively clarified the longstanding bundled payment requirement for outpatient services furnished within three days of an inpatient admission (i.e., the “three-day payment window”). Under previous Medicare law, the operating costs of inpatient services (i.e., the amount for which an inpatient diagnosis related group (DRG) payment is made) include the cost of all services furnished by the hospital or an entity wholly owned or operated by the hospital during the three days preceding the patient’s date of admission if the services are diagnostic or other services related to the admission. See 42 U.S.C. § 1395ww(a)(4).

The new legislation adopts a new statutory definition for the phrase “other services related to the admission” that must be billed as part of the inpatient stay. Specifically, other services related to the admission include all services that are nondiagnostic (other than ambulance and maintenance renal dialysis services) for which payment may be made by Medicare that are (1) provided on the same date of the patient’s inpatient admission, or (2) during the three days preceding the date of admission unless the hospital can demonstrate that such services are not related to the admission, in a form and manner specified by the Secretary. Prior to the new law, CMS had defined “related services” through the use of diagnosis codes, requiring a match between the outpatient and inpatient codes as the determining factor of relatedness. Thus, an outpatient service that was appropriately coded with a different ICD-9-CM code than the primary diagnosis of the inpatient admission could be billed separately, based on the different codes used. The new law emphasizes the affirmative duty of hospitals to demonstrate the “non-related” nature of the services and could narrow the application of the three-day payment window. There were no changes in the statute affecting the billing of diagnostic services (i.e., they still are required to be bundled into the inpatient bill if furnished within three days of the patient’s admission).

In the “very near future,” CMS plans to redefine “related” in terms of outpatient nondiagnostic services and also expects to provide instructions about how to bill for related therapeutic services furnished during the three-day payment window. Until then, CMS advises that “hospitals should include charges for all diagnostic and nondiagnostic services that meet the requirements of the provision. A hospital may separately bill for a nondiagnostic service if it believes that it is truly distinct and unrelated to the inpatient stay, provided that the hospital has documentation to support that the service is unrelated and should be separately billed.” Until further instructions are issued, hospitals may run into trouble trying to determine what is “truly distinct and unrelated to the inpatient stay,” as the prior bright line definition based on diagnosis codes may no longer be sufficient to demonstrate the “unrelatedness” of the services. It is unclear whether CMS will continue to rely on matching diagnosis codes for proof of relatedness, or adopt an entirely new policy but, until it makes this clarification, hospitals have the difficult task of complying with the requirements of a provision that have not yet been fully developed.

The new provision is effective for services that are furnished on or after June 25, 2010, the date of the enactment of the law. In addition, it prohibits the Medicare program from reopening or adjusting payments when hospitals submit new claims for services furnished prior to June 25 in order to separately bill outpatient nondiagnostic services.

For more information, please contact Steven A. Eisenberg, or 216.861.7903 or Gregory N. Etzel, or 713.646.1316. Meera Patel contributed to this article.

COURT FINDS NO FEDERAL PEER REVIEW PRIVILEGE

Although every state recognizes a medical peer review privilege, virtually no federal court has ever recognized such a privilege under federal law. In a suit brought under federal law in a federal court, federal rather than state privilege law applies. Consequently, the state peer review privilege generally will not be applicable, and peer review material will be subject to discovery. However, the court will, in most cases, protect the confidentiality of such information through protective orders, confidentiality agreements and, when appropriate, by disclosure only after in-camera review of these documents.

Many believe that the Health Care Quality Improvement Act of 1986 (HCQIA) provides a privilege for peer review materials. However, the HCQIA only provides immunity from suit to peer review participants. HCQIA does not protect peer review documents from discovery. In addition, Congress specifically rejected a federal peer review privilege for peer review materials in civil rights lawsuits. See 42 U.S.C. § 11111.

Information reported to the National Practitioner Data Bank (NPDB) and the Healthcare Integrity and Protection Data Bank (HIPDB) is considered confidential and generally may not be disclosed. The confidentiality provisions, however, do not apply to the original documents or records from which the reported information is obtained. Consequently, information gathered during the peer review process and reported to a data bank generally is not privileged under federal law. Singh v. Pocono Medical Center, No. 09-439 (M.D. Pa., June 15, 2010).

For more information, please contact Robert M. Wolin, or 713.646.1327.

I LOVE YOU!—Government Employee Work Pagers Subject to Employer Scrutiny

The U.S. Supreme Court recently examined, in City of Ontario v. Quon, No. 08-1332, whether a governmental employer had the right to read text messages sent and received on a pager it owned and issued to an employee. In this case, when employees exceeded their monthly character limits for several months running, the governmental employer sought to determine if the character limit was too low or whether the overages were for personal messages. To conduct its review, the governmental employer asked the pager vendor to provide a few months of message printouts for review. Wouldn’t you know, the messages included sexually explicit private messages!

Where an employee has a legitimate privacy expectation, (e.g., with a personal pager) a governmental employer’s intrusion on that expectation for non-investigatory, work-related purposes, as well as for investigations of work-related misconduct, is judged by the standard of reasonableness under all the circumstances. The warrantless review of the public employee’s pager transcript was reasonable because it was motivated by a legitimate work-related purpose, and because it was not excessive in scope, only involving a couple of months. A governmental employer’s review may not be excessively intrusive.

The court, however, acknowledged that privacy expectations in communications made on electronic equipment owned by a governmental employer are quickly shifting with changes in technology and carefully avoided “elaborating too fully on the Fourth Amendment implications of emerging technology before its role in society has become clear.” Consequently, governmental providers must regularly update their policies regarding employee privacy expectations and carefully consider these changes when conducting an investigation. In addition, the requirements of HIPAA and state medical privacy laws should be carefully weighed when updating privacy policies or conducting an investigation.

For more detail, see U.S. Supreme Court Approves Monitoring of Employer-Owned Electronic Equipment.

For more information, please contact Robert M. Wolin, or 713.646.1327.

EVENTS CALENDAR

July 14, 2010

Houston partners Susan Feigin Harris and Gregory N. Etzel will speak on “What the Health Care Reform Act Means for Hospitals, Physicians, Patients and Their Lawyers” at the Houston Bar Association Health Section meeting.

July 26, 2010

Houston partner Susan Feigin Harris will speak on “Back to the Future: Accountable Care Organizations, Clinical Integration, Medical Homes and Emerging Models for Delivery System Reform” at the 2010 TSCPA Advanced Health Care Conference sponsored by the Texas Society of Certified Public Accountants in San Antonio, Texas.

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