News / Resources

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

• FTC, CMS and OIG to Conduct ACO Workshop
• CMS Posts Stark Self-Disclosure Protocol
• House Votes to Expand OIG Exclusion Authority
• OIG Finds CMS Failed to Report Many Adverse Actions
• New CMS Rule Tightens Provider Screening Requirements
• Seventh Circuit Allows Research Time in IME FTE Count
• Regional Infrastructure Completed to Help Switch to EHR
• Events Calendar

FTC, CMS AND OIG TO CONDUCT ACO WORKSHOP

The Federal Trade Commission (FTC), HHS Office of Inspector General (OIG) and the Centers for Medicare and Medicaid Services (CMS) will host an accountable care organization (ACO) workshop, October 5, 2010 (9:00 am to 4:30 pm Eastern Standard time), to discuss many of the legal issues and potential barriers raised by the healthcare industry in response to the emergence of ACOs under the Patient Protection and Affordable Care Act (PPACA). While registration for in-person attendance is fully subscribed, details for accessing a webcast of the workshop are expected to be posted to the CMS website Friday, October 1.

The Medicare shared savings program contemplates groups of providers coming together in some integrated fashion to manage and coordinate care for program beneficiaries. [See PPACA, Section 3022.] Under this concept, which has been tested via several Medicare demonstration programs in the recent past, an ACO may receive payments for shared savings if the ACO meets certain quality performance standards established by the Secretary. PPACA also contemplates a similar ACO demonstration project for pediatric providers. The financial structure and referral relationships between and among disparate providers in a given market can implicate several regulatory regimes, including the antitrust, anti-kickback and physician referral and civil money penalties laws.

The workshop has identified three areas of focus: (1) an assessment of the variety of possible ACO structures in different healthcare markets and their resulting impact on price and quality in healthcare delivery to all beneficiaries; (2) an assessment of whether the above-referenced laws should or could be addressed in the regulation currently under draft by the Secretary; and (3) an assessment of whether a specific exception or safe harbor should be created to accommodate the legal concerns raised in the formation of ACOs.

The morning of the workshop will be devoted to addressing various antitrust concerns raised by ACOs and will feature healthcare providers and experts in health policy. The first session will focus on the various indicia involved in clinical integration and explore various options for achieving ACO goals. The second morning session will explore ways to encourage formation of multiple ACOs among otherwise independent practitioners, including (1) analyses of exclusive provider arrangements; (2) the impact of risk-based contracting on market power assessments; (3) ways to assess the impact of any adverse pricing or quality; and (4) financial, utilization, outcome and patient experience data necessary to monitor and measure the impact of an ACO on price and quality in a market.

Afternoon sessions focus on the anti-kickback, self-referral and civil money penalties laws and the potential development of safe harbors or exceptions to accommodate the formation of ACOs.

In the notice of the workshop and their request for public comment, the agencies indicated a desire to understand how ACO-type arrangements might be constrained by these laws and have asked for specific examples and/or scenarios regarding potential impediments.

Baker Hostetler has submitted questions and comments to CMS in response to the agency’s request for input, and are active participants in discussions relating to these specific issues. For further information about the workshop or ACOs, please contact Susan Feigin Harris, or 713.646.1307 or Steven A. Eisenberg, or 216.861.7903.

CMS POSTS STARK SELF-DISCLOSURE PROTOCOL

CMS has posted to its website the Voluntary Self-Referral Disclosure Protocol for violations of the Stark Law (SRDP) required under PPACA. The SRDP is similar to OIG’s existing Self-Disclosure Protocol, which the OIG closed to Stark Law-only violations (i.e., those without a potential anti-kickback law violation) in March 2009. CMS states that the SRDP is to be used to resolve matters that a party believes are actual or potential violations of the Stark Law (not to determine whether a violation has occurred). Thus, disclosing parties should be prepared to resolve overpayment liabilities for the identified conduct. In this regard, submission of a disclosure under the SRDP suspends until settlement the new PPACA obligation to return potential overpayments within 60 days of identification.

The SRDP requires electronic submission and specifies the information necessary for the disclosure, including identifying information and a description of the nature of the matter being disclosed. The disclosing party must submit a complete legal analysis of the application of the Stark Law, including exceptions potentially applicable to the matter. A description of the circumstances under which the matter was discovered also is required, as well as information describing existing compliance measures and/or measures put in place to address the matter. Of note, CMS is requiring a full financial analysis at the time of submission, including the total amount actually or potentially due and owing. CMS also encourages parties to place estimated overpayment funds in interest-bearing escrow accounts to assure that adequate resources are set aside to repay amounts owed.

CMS will begin verification procedures upon receipt of the disclosure. To facilitate this process, the agency is requiring access to all financial statements and supporting documents without assertion of privileges, although CMS states that it will not request production of written communications subject to the attorney-client privilege.

Finally, CMS sets forth several factors that it will consider in reducing amounts owed, including (1) the nature and extent of the practice, (2) the timeliness of the self-disclosure, (3) cooperation in providing additional information, (4) litigation risk associated with the matter, and (5) the financial position of the disclosing party. Although PPACA grants CMS the authority to reduce amounts due and owing, the agency specifically states in the SRDP that it has no obligation to do so.

The SRDP provides a definitive avenue to address and resolve potential Stark Law violations. Suspension of the 60-day period to return overpayments offers an additional incentive to utilize the SRDP. Parties utilizing the SRDP should do so, however, only with full awareness of all components of the process.

For more information, please contact Donna S. Clark, or 713.646.1302.

HOUSE VOTES TO EXPAND OIG EXCLUSION AUTHORITY

The House recently passed a bill granting the OIG expanded authority to exclude from federal healthcare programs, executives and parent corporations affiliated with companies convicted of Medicare fraud. In a June hearing before the House Ways and Means Health Subcommittee, the Chief Counsel for the OIG testified:

Establishing accountability is challenging in part because corporations sometimes intentionally construct byzantine structures that obscure responsible parties from view. OIG has seen a variety of methods used to conceal true ownership, including establishing shell corporations, creating limited liability companies (LLC) to manage operations . . . creating LLCs for real estate holdings, and creating affiliated corporations to lease and sublease among the various inter-owned corporations.

Introduced by Rep. Pete Stark (D-Calif.) at the request of the OIG, the Strengthening Medicare Anti-Fraud Measures Act of 2010 (H.R. 6130) proposes to close two loopholes used to avoid exclusion: (1) the practice of propping up a shell company to insulate the parent company from liability, and (2) the ability of executives to leave companies accused of fraud prior to conviction and thereby escape exclusion from federal healthcare programs. To that end, the bill would expand the OIG’s power to exclude any individual who was an officer, managing employee or owner of the company (or affiliated entity) at the time the fraud occurred.

The legislation authorizes the OIG to exclude “an entity affiliated with such sanctioned entity.” For purposes of this bill, “affiliation” is a sweeping connector. For example, entities would be considered affiliated if one of the entities is a person with an ownership or control interest in the other entity or if there is a person who is an officer or managing employee of both entities.

The bill, which was passed in the House by voice vote on September 22, 2010, has been referred to the Senate Committee on Finance. For more information, please contact B. Scott McBride, or 713.646.1390 or Ameena N. Ashfaq, or 713.646.1329.

OIG FINDS CMS FAILED TO REPORT MANY ADVERSE ACTIONS

An OIG report, released September 21, 2010, found that CMS failed to report many adverse actions taken against providers to the Healthcare Integrity and Protection Data Bank (HIPDB) as required by law. CMS frequently takes adverse actions against providers which must be reported to the HIPDB, including revocations and suspensions of laboratory certifications; terminations of providers from participation in Medicare; and civil monetary penalties against all types of providers, managed care plans and prescription drug plans. According to the OIG, CMS was under the impression that only adverse actions related to fraud and abuse were required to be reported to the data bank, but this was in contravention of the Social Security Act. CMS’s reporting varied by provider type, such that none of the 148 adverse actions imposed against laboratories in 2007 and the 30 adverse actions imposed against managed care and prescription drug plans between January 1, 2006, and July 31, 2009, had been reported to the HIPDB. CMS also failed to report any adverse actions taken against durable medical equipment suppliers in 2008, reportedly as a cost-saving policy decision. Finally, 45 nursing homes were terminated from participating in Medicare between 2004 and 2008, but CMS failed to report these providers until well after the required reporting period. CMS’s response to the report stated that it agreed with the OIG’s recommendation that all adverse actions be reported and that it would work to develop procedures and educate staff and contractors about HIPDB reporting.

For more information, please contact B. Scott McBride, or 713.646.1390 or Darby C. Allen, or 713.646.1311.

NEW CMS RULE TIGHTENS PROVIDER SCREENING REQUIREMENTS

CMS recently released a proposed rule to implement the new PPACA provider screening and enforcement measures for Medicare, Medicaid and Children’s Health Insurance Program (CHIP). Under the proposed rule, CMS would apply three levels of screening tools: (1) “limited risk” providers, including physicians, nonphysician practitioners, medical clinics and publicly-traded providers/suppliers, will have enrollment requirements, license and database verifications; (2) “moderate risk” providers/suppliers, including comprehensive outpatient rehabilitation facilities (CORFs), independent diagnostic testing facilities (IDTFs) and currently-enrolled durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) suppliers and home health agencies (with the exception of publicly-traded companies), will have the above verifications plus unscheduled site visits; and (3) “high risk” providers/suppliers, including prospective DMEPOS suppliers and home health agencies, will have verifications, unscheduled site visits, criminal background checks and fingerprinting. Additionally, the proposed rule (1) establishes requirements for suspending payments to providers and suppliers based on credible allegations of fraud in Medicare and Medicaid; (2) establishes the authority for imposing a temporary moratorium on Medicare, Medicaid and CHIP enrollment on providers and suppliers when necessary “to help prevent or fight fraud, waste, and abuse without impeding beneficiaries’ access to care”; and (3) offers the states guidance on terminating providers from Medicaid and CHIP that were terminated by Medicare or another state’s Medicaid or CHIP program. To pay for this increased screening, a $500 fee will be imposed on most providers/suppliers enrolling in Medicare, Medicaid and CHIP for the first time, as well as currently enrolled entities revalidating their status.

For more information, please contact Summer D. Swallow, or 713.646.1306.

SEVENTH CIRCUIT ALLOWS RESEARCH TIME IN IME FTE COUNT

The Seventh Circuit recently ruled that “pure research time” must be included in a provider’s fiscal year 1996 full time equivalent (FTE) resident count for purposes of the Medicare indirect medical education (IME) adjustment. The University of Chicago Medical Center v. Sebelius, 2010 WL 3324896 (7th Cir. 2010). With this ruling, the Seventh Circuit joins the Eastern District of Michigan, the District of Arizona, the District of Rhode Island (reversed by the 1st Circuit) and the Southern District of Ohio in holding that prior to October of 2001, resident time spent in research and other scholarly activities must be included in the IME FTE count. However, while other courts relied on the plain language of the IME regulation, PPACA saved the Seventh Circuit from having to decide whether to issue a decision contrary to the First Circuit’s 2008 ruling that resident research time cannot be included in the IME FTE resident count. See Rhode Island Hospital v. Leavitt, 548 F.3d 29 (1st Cir. 2008). Section 5505 of PPACA states that effective January 1, 1983, the IME FTE count includes “all the time spent by an intern or resident in an approved medical residency training program in non-patient care activities, such as didactic conferences and seminars . . . that occurs in the hospital.” The court reasoned, “to us, in ordinary parlance, research activities are clearly a subset of non-patient care activities.” Noting that the First Circuit “did not have the opportunity to consider Congress’s health-care legislation,” the court ruled that, based on the “dispositive” legislation, the hospital should have received reimbursement as part of its IME adjustment for pure research in 1996. The Seventh Circuit’s application of PPACA to the pre-2001 resident research time issue should serve as useful precedent for providers with pending appeals on this issue.

For more information, please contact Krista M. Barnes at or 713.646.1352.

REGIONAL INFRASTRUCTURE COMPLETED TO HELP SWITCH TO EHR

On September 28, 2010, David Blumenthal, M.D., National Coordinator for health information technology, announced selection of the final Regional Extension Centers (RECs), completing a national system of 62 organizations that will help physicians, clinics and hospitals to move from paper-based medical records to electronic health records (EHR).

RECs were created last year under the Health Information Technology Economic and Clinical Health (HITECH) Act, part of the American Recovery and Reinvestment Act of 2009. Under the HITECH Act, $677 million is allocated for the next two years to support a nationwide system of RECs. Additionally, the HITECH Act also created the Medicare and Medicaid EHR incentive programs, which will provide incentive payments to eligible professionals and hospitals that adopt and demonstrate meaningful use of certified EHR technology. Incentives totaling as much as $27.4 billion over ten years could be expended under the program, which is administered by CMS.

RECs will target their assistance to eligible primary care providers in smaller practices as well as small and rural hospitals and public health clinics. However, the RECs also will serve as a resource for all providers in an area, giving assistance, as feasible, to any doctor, hospital or clinic making the request. Each REC organization has identified a target number of primary care physicians based on population needs to be assisted in the first two years of the program.

For more information, please contact John S. Mulhollan, or 216.861.7484.

EVENTS CALENDAR

October 1

Houston partner Susan Feigin Harris will speak on “Health Reform and Its Impact on Children’s Hospitals” at a “brown bag” telephone presentation sponsored by the Children’s Hospital Affinity Group of the American Health Lawyers Association.

October 11

Houston partner Susan Feigin Harris will speak on “Healthcare Reform—What’s Next?” at the 2010 Health Law Conference sponsored by the Texas Hospital Association in Austin, Texas.

Houston partner Donna Clark will present “Fraud and Abuse Update” at the 2010 Health Law Conference sponsored by the Texas Hospital Association in Austin, Texas.

Houston partner Scott McBride will present “Hospital Compliance Programs: The Tween Years” at the 2010 Health Law Conference sponsored by the Texas Hospital Association in Austin, Texas.

Baker & Hostetler LLP publications are intended to inform our clients and other friends of the Firm about current legal developments of general interest. They should not be construed as legal advice, and readers should not act upon the information contained in these publications without professional counsel. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you written information about our qualifications and experience. © 2010 Baker & Hostetler LLP