Highlight on Virginia: Medicaid agency fails to collect $2.9M in drug rebates

For a covered outpatient drug to be eligible for federal reimbursement under the Medicaid program’s drug rebate requirements, manufacturers must pay rebates to the states. States bill the manufacturers for the rebates to reduce the cost of the drugs to the program. Previous HHS Office of Inspector General (OIG) reviews found that states did not always bill and collect all rebates due for drugs administered by physicians to enrollees of Medicaid managed-care organizations (MCOs).

An OIG review of Virginia’s Department of Medical Assistance Services, Division of Health Care Services (Virginia), from January through December 2013, found that Virginia did not bill manufacturers for some rebates for physician-administered drugs dispensed to enrollees of Medicaid MCOs. As a result, it failed to collect an estimated $2.9 million (federal share) in rebates.

Virginia uses a contractor to manage its drug rebate program. According to the OIG audit, in calendar year 2013, Virginia paid MCOs $2,411,629,093 ($1,238,462,930 federal share), which included expenditures for physician-administered drugs.

The OIG found that Virginia properly billed manufacturers for rebates for drugs associated with the National Drug Codes (NDCs) in its audit sample. However, Virginia did not have valid NDCs for other drug utilization data submitted by MCOs for physician-administered drugs, and it did not bill manufacturers for rebates for these drugs. Virginia estimated average rebates per claim billed to manufacturers, and the OIG determined these estimates to be reasonable. The OIG applied the estimates and determined that Virginia did not bill rebates of $5,831,528 ($2,915,764 federal share) to manufacturers for physician-administered drug utilization without valid NDCs.

The OIG concluded that Virginia did not bill manufacturers for rebates for these drugs because the MCOs submitted utilization data to Virginia with a blank NDC field or an invalid NDC. Although Virginia required MCOs to submit valid NDCs for all physician-administered drug utilization, Virginia did not implement edits in its Medicaid Management Information System to ensure that MCOs submitted valid NDCs. As a result, Virginia did not obtain rebates for these drugs.

The OIG recommended that Virginia: (1) work with CMS to resolve the drug utilization data without valid NDCs by determining the correct NDCs, billing manufacturers for the estimated $5,831,528 ($2,915,764 federal share) in rebates, and refunding the Federal share of rebates collected; (2) implement Medicaid Management Information System edits to verify that NDCs are present and valid in all drug utilization data; and (3) ensure that MCOs submit drug utilization data containing NDCs for all physician-administered drugs.

Virginia concurred with the OIG’s findings and plans to take corrective actions.

 

Highlight on Oregon: Medicaid fraud control unit gets report card from OIG

A 2016 study by the HHS Office of Inspector General (OIG) of Oregon’s Medicaid Fraud Control Unit (MFCU) found that for fiscal years (FYs) 2013 through 2015, the Oregon Unit reported 92 criminal convictions, 34 civil judgments and settlements, and combined criminal and civil recoveries of nearly $33 million.

The OIG study also found that while the Oregon Unit was generally in compliance with applicable laws, regulations, and policy transmittals, it identified three areas where the Unit should improve its adherence to performance standards and its compliance with applicable federal requirements. Specifically, the Unit: (1) did not fully secure its case files; (2) part of the Unit’s memorandum of understanding (MOU) with two of its state partners was inconsistent with the federal regulation governing Medicaid payment suspensions; and (3) the Unit did not report some convictions and adverse actions to federal partners within the appropriate timeframes.

MFCU program

The mission of MFCUs is to investigate and prosecute Medicaid provider fraud and patient abuse or neglect under state law. Section 1902(a)(61) of the Social Security Act requires each state to operate a MFCU, unless the Secretary of HHS determines that operation of a Unit would not be cost-effective because minimal Medicaid fraud exists in a particular state and the state has other adequate safeguards to protect Medicaid beneficiaries from abuse and neglect. Currently, 49 states and the District of Columbia have MFCUs.

Section 1903(a)(6)(B) gives the HHS Secretary the authority to delegate the administration of the MFCU grant program. The authority to administer the MFCU grant program has been delegated to the OIG. To receive federal reimbursement, each Unit must submit an initial application to OIG for approval and be recertified each year thereafter. In annually recertifying the Units, OIG evaluates Unit compliance with federal requirements and adherence to performance standards.

Study details

Of the Unit’s 92 convictions over the three-year period, the OIG found that 78 involved provider fraud and 14 involved patient abuse or neglect. Of the Unit’s 34 civil judgments and settlements, 33 were from “global” cases and one was from a state-only civil case. “Global” cases are civil False Claims Act (FCA) cases that are litigated in federal court by the U.S. Department of Justice and involve a group of MFCUs. According to Unit management, the Unit prioritizes the investigation of cases that will result in a criminal conviction and thus pursues few state-only civil cases.

Global cases accounted for $24 million of the $33 million in total recoveries. Of the approximately $8 million in recoveries from nonglobal cases, $2 million were from criminal cases and $6 million were from a state-only civil case in FY 2013.

Unsecured case files

During the onsite review, the OIG observed that the Unit’s paper case files were not secured from access by non-Unit staff. The OIG observed that the Unit stored case files for closed cases in cabinets without locks, located in general office space. And although individuals must use a coded access card to enter the Unit’s general office space, non-Unit staff could access the space without supervision during non-business hours. In addition, the Unit did not have policies or procedures in place for securing paper case files from unauthorized access.

MOU inconsistent with federal regulations

The OIG found that in its MOU with the Oregon Health Authority (OHA) and the Department of Human Services (DHS), the Unit requested that in all cases in which a credible allegation of fraud is referred to the Unit, the Medicaid agency find good cause not to impose a payment suspension. Such a “blanket” request pertaining to all referrals is inconsistent with the federal regulation governing Medicaid payment suspensions, which requires that a Medicaid agency suspend payments to a provider when there is a credible allegation of fraud against the provider, unless the Medicaid agency determines that good cause exists not to suspend payments. Unit management reported to the OIG that they were aware that the MOU needed to be revised to remove the blanket request and stated that they planned to make revisions in 2017. Unit management also told the OIG that although it had not updated the MOU to reflect the change, in January 2015 the it began making case-by-case determinations on whether to request that the Medicaid agency not impose payment suspensions for each referral.

Late reporting of convictions/adverse actions 

The study found that although the Unit reported nearly all convictions to the OIG and all adverse actions to the National Practitioner Data Bank (NPDB), it did not report some within the appropriate 30 day timeframes.

Specifically, out of 92 convictions, the Unit reported 14 convictions to the OIG more than 90 days after sentencing, 12 within 61 to 90 days after sentencing, and 28 within 31 to 60 days after sentencing. According to the OIG, late reporting of convictions could delay the initiation of the program exclusion process, resulting in improper payments to providers by Medicare or other federal health care programs, or possible harm to beneficiaries.

In addition, the OIG found that while the Unit reported 95 adverse actions to the NPDB, it reported 67 of these more than 30 days after the adverse action. Specifically, the Unit reported 21 adverse actions more than 90 days after the action, 8 within 61 to 90 days after the action, and 38 within 31 to 60 days after the action. The NPDB is designed to restrict the ability of physicians, dentists, and other health care practitioners to move from state to state without disclosure or discovery of previous medical malpractice and adverse actions. As with program exclusions, late reporting of adverse actions to the NPDB could result in improper payments or beneficiary harm.

OIG recommendations

The OIG report recommended that the Unit: (1) implement procedures for securing case files; (2) revise its MOU with state partners to be consistent with federal regulation; and (3) implement processes to ensure it reports convictions and adverse actions to federal partners within the appropriate timeframes. The Unit concurred with all three recommendations.

Personal health care spending from 1996 to 2013 analyzed

Despite the increase in health care spending in the United States, not enough is known about how private and public spending varies according to condition, age and sex group, and type of care. An investigative study of government budgets, insurance claims, U.S. government records, and facility and household surveys, published by JAMA, concluded that from 1996 to 2013 there was $30.1 trillion in personal health care spending for 155 separate conditions, with spending on diabetes, ischemic heart disease, and low back and neck pain accounting for the highest amounts of spending.

Conditions and type of care. The 155 conditions examined included cancer, which was broken down into 29 separate conditions. For the top three spending conditions, the study made the following findings for 2013:

  • Diabetes had the highest health care spending in 2013, with an estimated $101.4 billion in spending, including 57.6 percent spent on pharmaceuticals and 23.5 percent spent on ambulatory care.
  • Ischemic heart disease had the second-highest amount of health care spending in 2013, with estimated spending of $88.1 billion.
  • Low back and neck pain had the third-highest amount of health care spending in 2013, with estimated health care spending of $87.6 billion.

The study’s analysis of spending from 1996 through 2013 found that personal health care spending increased for 143 of the 155 conditions. Additional study findings regarding spending increases from 1996 through 2013 include:

  • Low back and neck pain spending increased by an estimated $57.2.
  • Diabetes spending increased by an estimated $64.4 billion.
  • Emergency care spending increased 6.4 percent.
  • Retail pharmaceutical spending increased 5.6 percent.
  • Inpatient care spending increased 2.8 percent.
  • Nursing facility spending increased 2.5 percent.

Age and spending. The study found that spending among working-age adults, totaling an estimated $1 trillion in 2013, was attributed to many conditions and types of care. Among persons 65 years or older, an estimated $796.5 billion was spent in 2013, with 21.7 percent occurring in nursing facilities. The smallest amount of health care spending was found to be for persons under age 20 years, with an estimated at $233.5 billion spent, or only 11.1 percent of total personal health care spending in 2013.

Age, sex and spending. The study found that the greatest spending was for individuals between 50 and 74 years, with spending highest for women 85 years and older. Because life expectancy for men is lower, the study found less spending by men in the 85 years and older age group.

Estimated spending differed the most between the sexes from age 10 to 14 years, according to the study, when males have health care spending associated with attention-deficit/hyperactivity disorder, and at age 20 to 44 years, when women have spending associated with pregnancy and postpartum care, family planning, and maternal conditions. Together the study estimated that these conditions constituted 25.6 percent of all health care spending for women from age 20 through 44 years in 2013. Without this spending, the study concluded that females spent 24.6 percent more overall than males in 2013.

Conclusion. The study concludes that this information is important because it may have implications for efforts to control U.S. health care spending.

American Kidney Fund calls NY Times article ‘factually incorrect and unfair’

The American Kidney Fund® (AKF), whose Health Insurance Premium Program (HIPP) helps pay insurance premiums for 80,000 people who have end-stage renal disease (ESRD) and need kidney dialysis treatment, categorically denied the accusations contained in a New York Times article that it resists giving aid to patients at dialysis clinics that do not donate money to AKF.

Background

According to the New York Times article, in 1995, AKF had a $5 million annual budget and contributions from the dialysis industry accounted for less than 10 percent of its donations. In 1997, however, AKF obtained an advisory opinion from the HHS Office of Inspector General (OIG) that allowed dialysis clinics treating Medicare and Medigap patients to make charitable donations to AKF to fund its HIPP without incurring civil money penalties under section 231(h) of the Health Insurance Portability and Accountability Act (HIPAA) (P.L. 104-191). Section 231(h) prohibits payments to or on behalf of a federal health care program beneficiaries if the payments are likely to influence such beneficiaries to use a particular provider. The OIG advisory opinion found that AKF’s payment of premiums on behalf of financially needy beneficiaries was not likely to influence a beneficiary’s selection of a particular provider and would be allowed.

The Times reported that this 1997 OIG advisory opinion opened the floodgates for charitable donations to AKF, resulting in a 2015 revenue of $264 million.

Accusations

The Times article described multiple cases where AKF allegedly pushed back on dialysis clinics that had not donated money, discouraging them from signing up their financially needy patients for assistance from the HIPP fund. The article also alleged that, until recently, AKF guidelines actually stated that clinics should not apply for patient aid if the clinic had not donated to the charity.

The article further alleged that in some cases, according to insurers and government officials, dialysis clinics used the HIPP fund to push Medicaid eligible people into private health insurance coverage through the health insurance exchanges, which can pay up to four times more than Medicaid for the same treatment. In fact, UnitedHealthcare of Florida, Inc. sued one dialysis clinic, American Renal Associates, for this practice, alleging that it is harming patients by moving them into less generous coverage. The lawsuit, filed in federal district court in Florida, also alleges that AKF directed some charitable donations directly back to patients at American Renal Associates.

In response to the investigation, AKF’s chief executive, LaVarne A. Burton, told the Times that “nearly 40 percent of the 213 dialysis companies whose clinics had successfully helped patients apply to the [HIPP] fund had never donated.” The Times noted, however, that Burton would not tell them “what percentage of the 80,000 patients the HIPP fund helps annually comes from clinics that do not donate, or how many of those patients come from the biggest companies, which donate most of their revenue.”

AKF response

AKF responded to the Times article with a press release posted on its website. The press release stated that the Times article “presented a factually incorrect and unfair picture of AKF” and emphasized the following points:

  • AKF asks all providers to contribute to HIPP—but it never requires it. If a clinic choses to donate, the donation goes into one funding pool. From that pool, grants are awarded to patients on a first- come, first-served basis. Patients can change dialysis clinics at any time and the grant follows the patient.
  • AKF has never turned away a patient who is financially qualified to receive a grant, and it never will, regardless of whether their provider donated to AKF.
  • AKF never conditions the issuing of grants on whether a provider contributed to AKF, and fully 40 percent of dialysis providers with patients receiving help from AKF do not contribute anything to AKF.
  • There is no “earmarking” of donations by AKF. Donations from a dialysis clinic go into a funding pool and are not used only for that clinics patients.
  • HIPP has firewalls in place to protect the integrity of the program. AKF’s funding staff does not have access to revenue data, i.e., they do not know whether a patient who is applying for assistance is treated at a clinic that donated to AKF.

AKF further explained that, when HIPP entered a period of instability five years ago, it embarked on an effort to educate providers about the need to contribute to the fund if the program was to continue. However, regardless of whether providers contributed, it claims that it has always continued to assist their patients. AKF expressed regret if their educational communications with providers lead them to believe that they would only assist the patients of donor facilities.

AKF also stated that it revised its HIPP guidelines to remove language in which it asked providers to donate because it does not want there to be any confusion over whether the contributions are voluntary. It also indicated that it developed a new patient-facing HIPP brochure that emphasizes that patients can receive HIPP assistance no matter where they have dialysis treatment.