COLORADO CARDIOLOGISTS CHALLENGE NEW DEFINITION OF DHS ENTITY
On September 23, 2008, a group of plaintiffs led by three cardiac cath labs, a cardiology practice group, and 30 individual cardiologists practicing medicine in the state of Colorado filed a complaint in U.S. District Court for the District of Columbia against Michael O. Levitt in his official capacity as the Secretary of the U.S. Department of Health and Human Services. Colorado Heart Institute, et al. v. Levitt, No. 1:08-cv-01626-RMC (D.D.C. Sept. 25, 2008). The complaint targets the expanded definition of a Designated Health Services (DHS) entity under the Inpatient Hospital Payment System (IPPS) Final Rule for FY 2009, which, if enforced, will render illegal "under arrangement" joint ventures that have become the common model for cardiac cath labs across the United States. 73 Fed. Reg. 48433 (August 19, 2008). For a complete discussion of the IPPS Final Rule, see the August 7, 2008 edition of the Health Law Update. The complaint seeks a judgment declaring the expanded definition unenforceable as contrary to the statutory Stark Law, arbitrary and capricious, and issued in excess of the Centers for Medicare and Medicaid Services's (CMS) authority.
Prior to the FY 2009 IPPS Final Rule, the definition of DHS entity included only the entity that directly received reimbursement from Medicare for the designated health service. Pursuant to the under arrangement model, the physician-owned cath labs would perform the services under arrangement with a local hospital. The hospital would pay the cath labs a fee for such services, but it was the hospital, not the cath labs, that would bill and be reimbursed by Medicare for the services provided. The cath labs were not deemed DHS entities, thus the physician-owners were free to refer patients to the cath labs (and the hospital), so long as the arrangement with the hospital met one of the Stark Law compensation exceptions.
If upheld, the 2009 definitional change, which expands the definition of entity to include the entity actually performing the service, will result in the cath labs themselves being characterized as DHS entities. This means that the physicians also will have to meet one of the ownership exceptions to Stark Law to stay in operation, and, save for the limited circumstances under which the rural exception may apply, there is simply no ownership exception that will likely fit. The Colorado plaintiffs allege that by characterizing under arrangements as involving a Stark Law ownership interest in addition to a Stark compensation interest, CMS has exceeded its authority and impermissibly "voided" the statutory Stark Law, which allows the operation of similar under arrangement joint ventures if they meet a compensation exception. See, 42 U.S.C. § 1395nn. While CMS has expressed concern over such under arrangements leading to overutilization of services, the Colorado plaintiffs argue that physician-owned cath labs are capable of performing services more efficiently than the hospitals themselves, thereby providing significant savings to the Medicare program.
For more information, please contact Steven A. Eisenberg, seisenberg@bakerlaw.com or 216.861.7903, or Emily E. Williams, eewilliams@bakerlaw.com or 216.861.7373.
DEADLINE FOR ADDING ISSUES TO EXISTING PRRB APPEALS IS APPROACHING
The deadline for adding new issues to existing Medicare reimbursement appeals before the Provider Reimbursement Review Board (PRRB) is rapidly approaching. According to the rule adopted by CMS, that deadline is 60 days from the August 21, 2008 effective date of the new PRRB rule, or October 19, 2008. See, 73 Fed. Reg. 30190 (May 23, 2008). Since October 19 is a Sunday, the next business day, October 20, would be the actual deadline according to additional clarifications made in the new PRRB rule. However, it is critical to remember that, under the new rule, the request to add issues must be received by the PRRB on or before the deadline.
As discussed in the August 19, 2008 Executive Alert, the PRRB recently adopted new "model forms" governing the appeals process, and hospitals seeking to add issues to their existing appeals should use "Model Form C – Request to Add Issue(s) to an Individual Appeal," which can be found at the end of the PRRB's new rules. Issues not added to existing appeals by the deadline will be lost (or, at a minimum, become very difficult to include). Thus, hospitals should take the opportunity to review their docket of existing PRRB appeals and add any issues for which they have a legitimate basis, even under circumstances where the hospital has traditionally waited to add such issues (e.g., issues with pending reopening requests).
If you have any questions with respect to the process for adding issues to your hospital's appeals, or relating to the new PRRB rules in general, please contact Gregory N. Etzel, getzel@bakerlaw.com or 713.646.1316, or Kathleen P. Rubinstein MPA, Policy Analyst, krubinstein@bakerlaw.com or 713.276.1650.
CMS SUSPENDS QUALITY DATA REPORTING FOR ANNUAL PAYMENT UPDATE
As hospitals begin to recover from the effects of Hurricane Ike, CMS instituted a data submission waiver for IPPS hospitals located in Louisiana and Texas under its statutory authority pursuant to § 1886(b)(3)(A)(vii)(II) of the Social Security Act. IPPS hospitals are required to submit certain inpatient quality data to receive the full Medicare payment update. The waiver applies to clinical process measurements for the second quarter of 2008 and to HCAHPS data for the third quarter of 2008. CMS's rationale for the waivers recognized that hospitals' medical records were damaged or destroyed during the storm and that a hospital's ability to contact and survey patients may have been impaired as a result of the storm. Additionally, hospitals will not have to validate their first quarter 2008 clinical process measures. CMS notified hospitals and Quality Improvement Organizations of the inpatient waiver on Friday, and expects to issue similar information soon for the hospital outpatient reporting programs.
For more information, please contact Susan Feigin Harris, sharris@bakerlaw.com or 713.646.1307.
PHYSICIAN FIST FIGHT HCQIA SUSPENSION ETIQUETTE
A physician whose competency was questioned by a colleague decided that confronting the physician colleague, demanding that the colleague stop questioning his experience, training, and competency, and threatening to sue him while blocking the doorway to prevent the colleague from leaving was the preferred approach to quality assurance.
As one might imagine, the physician colleague pushed aside the physician confronting him and exited the area. Of course, the parties differ on the degree of menace the confronting physician presented and the amount of force used to push him aside. Recognizing that no good deed goes unpunished, the hospital suspended the physician colleague for pushing the confronting physician aside based upon a complaint from the confronting physician.
Ordinarily the hospital would have been protected for its peer review actions under the Health Care Quality Improvement Act (HCQIA). However, in Stratienko v. Chattanooga-Hamilton County Hospital Authority, et al., the court held that several mistakes made by the hospital prevented dismissal of the physician's claims, at least in the summary judgment phase of the case. Stratienko v. Chattanooga-Hamilton County Hospital Authority, et al., No. 1:07-CV-258 (E.D. Tenn. Sept. 8, 2008).
First, the hospital suspended the physician for 30 days, which was too long without providing adequate notice and hearing procedures to the suspended physician. The HCQIA permits a summary suspension prior to investigation under 42 U.S.C. § 11112 (c)(2) for no longer than 14 days, during which an investigation should be conducted to determine the need for a professional review action.
Second, the hospital failed to make a reasonable effort to obtain the facts as required under 42 U.S.C. § 11112 (a)(2). In particular, the court was bothered by the fact that the decision to suspend was made within an hour of the fight and the people involved in the suspension decision "were unaware of the actions of" the assaulted physician. The physician, whose competency was challenged, reportedly was angry and actively sought out his colleague for a challenge. Based upon the lack of factual investigation, the court concluded that a reasonable jury could not reasonably believe that a physician should be suspended based upon an altercation, the cause of which was unclear or unknown. In essence, the court held that the hospital suspension was not imposed in the reasonable belief that it was warranted by the facts known after a reasonable effort to obtain the facts, as required under 42 U.S.C. § 11112 (a)(4). While the hospital's decision to suspend the physician was made within an hour of the fight, the suspension letter was not delivered to the physician until the following day, even though the letter was written and dated on the same day as the altercation.
The court likely was moved by the fact that the physician being punished had tried to advance the quality of care and was the victim of the menacing actions of the challenged physician through no fault of his own. Nonetheless, the message is clear, that for the HCQIA's prohibition on damages for professional review actions to be applicable, the hospital's actions must be consistent with the due process requirements of the HCQIA.
For more information, please contact Robert M. Wolin, rwolin@bakerlaw.com or 713.646.1327.
ELI LILLY TO BEGIN DISCLOSING PAYMENTS TO PHYSICIANS
In a move sure to spur copycat actions, Eli Lilly will become the first drug manufacturer to disclose voluntarily all payments made to physicians that exceed $500. This includes payments for speeches, conference attendance, advice and other services. Eventually, Lilly advises, it will disclose payments made to physicians for travel, entertainment, and gifts. The disclosures will begin in the second half of 2009 and will include payments made during the first half of 2009. In 2011, Lilly will begin disclosing payments made for clinical research, patterned after the Physician Payments Sunshine Act (H.R. 5606, S. 2029), currently pending in Congress.
OIG OKs INSURANCE PREAUTHORIZATION PROCESSING SERVICES
On September 19, 2008, the Office of Inspector General (OIG) issued Advisory Opinion No. 08-12 regarding a legal entity -- "Newco" -- to be formed by the Requestor to provide administrative insurance preauthorization processing and submission services for radiology and imaging centers. The centers would provide Newco with the patient information necessary for Newco to process and submit the preauthorization requests. The centers would pay Newco a "per service" fee for each preauthorization processed and submitted, regardless of whether or not the patient's insurer ultimately granted the preauthorization. Newco would make no assurances to the centers or to any patient with respect to obtaining preauthorization from any insurer. The fee would be the same for all centers and would represent fair market value for the services. Further, Newco would have no other direct or indirect financial relationship with the centers.
Concluding that the proposed arrangement would not result in referrals of federal healthcare business, the OIG opined that the arrangement would not generate prohibited remuneration under the anti-kickback statute. Of significance to the OIG was the fact that neither the Requestor, nor Newco, is, was, or would be (1) a healthcare provider, practitioner or supplier, (2) affiliated with the healthcare industry other than in the performance of obtaining authorizations, (3) in a position to receive or influence referrals of items or services covered under a federal healthcare program, or (4) in contact with private payor or federal healthcare program beneficiaries in the performance of their businesses.
The OIG found that there could be no violation of the anti-kickback statute absent potential referrals of federal healthcare program business. Newco would be performing purely administrative services; the services would not rise to the level of arranging for or recommending purchasing, leasing, or ordering items or services payable under a federal healthcare program; nor would the services involve coding, billing, or claims processing or review, which could potentially generate federal healthcare program business.
The OIG distinguished the proposed arrangement from potentially problematic arrangements where services are provided by a supplier, such as an imaging facility, or manufacturer, to a potential referral source. Those arrangements, said the OIG, pose a significant risk of fraud and abuse. The OIG went on to note that if an imaging center or manufacturer were to pay Newco to provide the services for or on behalf of a referral source, then the imaging center or manufacturer would be providing prohibited remuneration to a referral source, in violation of the anti-kickback statute.
For more information, please contact Laurie J. Levin, llevin@bakerlaw.com or 407.649.4076.
OIG FY 2009 WORK PLAN HAS SOMETHING FOR EVERYONE
On October 1, 2008, the OIG issued its FY 2009 Work Plan (Work Plan). The Work Plan is a goal of projects and reviews that the OIG intends to undertake, and often it previews areas that the OIG or other government agencies will investigate in upcoming years. As in past years, the OIG intends to review a wide variety of areas, touching every type of provider, Medicare Part C and D plans, and areas traditionally reviewed by the FDA.
Among the highlights in this Work Plan:
Provider-Based Status/Physician Practices: Extending an ongoing audit, the OIG will review whether hospitals are properly claiming provider-based status. Typically, this status provides the hospital with enhanced reimbursement versus freestanding facilities. The audit will include physician practices that hospitals have designated as provider-based.
Physician Place of Service Coding: Tied in with the review of provider-based status, the OIG will examine whether physicians are using the proper place of service codes when billing for physician services furnished either in an ambulatory surgical center or hospital outpatient department.
Physician Reassignment: Citing problems in certain regions, the OIG will review compliance with the Medicare reassignment of benefit rules.
Physician Referrals for Home Health Agency Services: The OIG will review physician referral trends and review whether referrals for services are consistent with CMS requirements.
Outpatient Physical Therapy: The OIG will examine utilization trends in outpatient physical therapy, focusing on therapists that have a high utilization rate.
EMTALA: An area that is seemingly in perpetual audit, the OIG will again review hospital compliance with EMTALA and discrepancies in EMTALA-alleged violations in different regions.
Lab Unbundling: Some may be reminded of the 1990s and the lab unbundling cases, but CMS will again review lab unbundling to determine whether laboratories are using different mechanisms to unbundle tests.
The OIG lists approximately 100 areas that may be reviewed as part of its Work Plan, available online.
For more information, please contact Steven A. Eisenberg, seisenberg@bakerlaw.com or 216.861.7903.
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