Kusserow on Compliance: GAO issues report critical of Medicare appeals process

The Backlog Saga Continues

The Government Accountability Office (GAO) conducted a review of the appeals process for Medicare fee-for-service (FFS) claims and issued a report in June 2016 that was highly critical of the Medicare appeals process. The process consists of four administrative levels of review within HHS, and a fifth level in which appeals are reviewed by federal courts. Appeals are generally reviewed by each level sequentially, as appellants may appeal a decision to the next level depending on the prior outcome. Under the administrative process, separate appeals bodies review appeals and issue decisions under time limits established by law, which can vary by level. They have not been meeting those deadlines for years. In fact, they have 700,000 pending appeals that would take years to clear up, even if new appeals were not filed.

The GAO found that CMS and two other components within HHS that are part of the Medicare appeals process have not made available full-use data collected in three appeal data systems to monitor the Medicare appeals process. It also found variations in how appeals bodies record decisions across the three systems, including the use of different categories to track the type of Medicare service at issue in the appeal. Absent more complete and consistent appeals data, the ability to monitor emerging trends in appeals is limited and is inconsistent with federal internal control standards that require agencies to run and control agency operations using relevant, reliable, and timely information. The GAO recommended that HHS take four actions, including improving the completeness and consistency of the data used by HHS to monitor appeals and implementing a more efficient method of handling appeals associated with repetitious claims.

Following the release of this report Nancy Griswold, Chief Administrative Law Judge, Office of Medicare Hearings and Appeals (OMHA), and Constance B. Tobias, Chair, Departmental Appeals Board (DAB), reported submitting a Notice of Proposed Rulemaking (NPRM) on changes to the Medicare claims appeal process as part efforts to eliminate the backlog of appeals currently pending at the OMHA and the DAB. The proposed changes designed to reduce the number of pending appeals and streamline the Medicare appeals process. They also sought increases in the budget for FY 2017 to add resources to work on the backlog problem.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2016 Strategic Management Services, LLC. Published with permission.

DEA has much to do to fully address recent GAO recommendations

Recent testimony before the Senate Judiciary Committee by Diana C. Maurer, Director of Homeland Security and Justice at the Government Accountability Office (GAO), indicated that while the Drug Enforcement Administration (DEA) has taken some steps to address 2015 GAO recommendations, it still has work to do regarding its administration of the controlled substance quota process, efforts to address controlled substance drug shortages, providing information and guidance to DEA registrants, and complying with guidelines for overseeing confidential informants.

The Controlled Substance Act (CSA) requires the DEA to set quotas that limit the amount of certain controlled substances that are available in the United States. The CSA also requires those handling controlled substances to register with the DEA. In addition, the DEA works to disrupt and dismantle major drug trafficking organizations and uses confidential informants to help facilitate its investigative efforts.

On February 2, June 25, and September 15, 2015, the GAO issued reports related to these DEA practices. In those reports, the GAO made 11 recommendations to the DEA. Maurer testified that, to date, the DEA has taken some actions to address these recommendations but has fully implemented only two of them.

Quota process

The GAO made four recommendations regarding the DEA’s administration of the controlled substance quota process: (1) strengthen its internal controls of its Year-End Reporting and Quota Management System (YERS/QMS), (2) establish performance measures related to quotas, (3) monitor and analyze YERS/QMS data, and (4) develop internal policies for processing quota applications and setting quotas.

Maurer testified that the DEA has implemented the first recommendation but has not been fully responsive to the second recommendation. She further testified that the GAO is awaiting further documentation from the DEA regarding the third and fourth recommendations and will update the status of these recommendations at that time.

The GAO also made three recommendations regarding barriers to effective coordination between the DEA and the FDA to prevent future shortages of controlled substances: (1) that the DEA and FDA promptly update the memorandum of understanding (MOU) between the two agencies; (2) that either in the MOU or a separate agreement, the DEA and the FDA specifically outline what information they will share and the time frames for sharing such information in response to a potential or existing drug shortage; and (3) that the DEA expeditiously establish formal policies and procedures to coordinate with the FDA with respect to expediting shortage-related quota applications.

Maurer testified that, in March 2015, the FDA and DEA updated the MOU; however, the second and third recommendations still remain open.

Information to DEA registrants

The GAO reported that the DEA has provided information to its registrants regarding their roles and responsibilities for preventing abuse and diversion through conferences, training, and other initiatives. The GAO also reported that the DEA provided additional resources, such as manuals for specific registrant groups and the DEA’s Know Your Customer guidance for distributors. However, Maurer testified that many registrants are not aware of these resources or they would like additional guidance, information, or communication from the DEA to better understand their roles under the CSA. The GAO recommended three actions to address registrants’ concerns.

First, the GAO recommended the DEA identify and implement means of regular, cost-effective communication with distributor, pharmacy, and practitioner registrants, such as through listservs or web-based training. As of April 2016, the DEA reported that it was in the process of developing web-based training modules for all of its registrant population, and was considering the best way to implement a listserv to disseminate information to its various registrant types. Maurer testified that the GAO plans to continue to monitor the DEA’s efforts in this area, and this recommendation remains open.

Second, to help address the concerns raised by some distributor and pharmacy registrants, the GAO recommended that the DEA solicit input from distributors, or associations representing distributors, and develop additional guidance for distributors regarding their roles and responsibilities for suspicious orders monitoring and reporting. Thirdly, the GAO recommended that the DEA solicit input from pharmacists, or associations representing pharmacists, about updates and additions needed to existing guidance for pharmacists, and revise or issue guidance accordingly. With regards to the second and third recommendations, Maurer testified that some efforts have been make by the DEA, however, the GAO plans to continue monitoring the DEA’s efforts in these areas, and these recommendations remain open.

Confidential informants policy

The GAO reported that the DEA’s confidential informants policy required agents to consider most of the factors identified in the Attorney General’s Guidelines for conducting initial suitability reviews prior to using a person as an informant. The GAO also reported that the DEA’s policy was partially consistent with the Guidelines’ requirements to provide written instructions to an informant regarding the parameters of the authorized, but otherwise illegal, activity and to have the informant sign an acknowledgment of these instructions. Additionally, the GAO found that the DEA’s policy was consistent with the provision for revoking authorization in cases where DEA has reason to believe that an informant is not in compliance with the authorization. However, the GAO found that the DEA’s policy did not address circumstances unrelated to the informant’s conduct in which the DEA may, for legitimate reasons, be unable to comply with precautionary measures necessary for overseeing otherwise illegal activity.

In response, DEA officials told the GAO that they did not authorize informants to participate in otherwise illegal activity without agent supervision, and, therefore, this requirement would not be applicable to the DEA. In response, the GAO pointed out that the DEA’s policy did not explicitly state that direct supervision of an agent is required for all instances of an informant’s participation in otherwise illegal activity. Additionally, the GAO noted that the DEA’s policy did not require the informant to sign a written acknowledgment that the authorization had been suspended or revoked.

As a result, the GAO recommended that the DEA, with assistance and oversight from the Department of Justice (DOJ) Criminal Division, update its policy and corresponding monitoring procedures to explicitly address the Guidelines’ provisions on oversight of informants’ illegal activities. According to Maurer, the DOJ Criminal Division has reviewed a revised version of the DEA’s agents manual and has determined that the revised manual is fully consistent with the Guidelines policy regarding confidential informants. Maurer noted in her testimony that the GAO plans to review the updated DEA policy when finalized to determine if the DEA has fully implemented its recommendation.



Highlight on Tennessee: Malpractice alternative under consideration, not all agree on potential effects

Pending Tennessee legislation on medical malpractice could potentially drastically impact the state’s health care costs, some believe. Although action on HB0546/SB0507 was deferred last spring, the Patient Compensation System (PCS) is on the legislature’s agenda as the 109th Tennessee General Assembly is underway.


 The high number of malpractice suits, resulting in high malpractice insurance costs, has long been a concern for the medical community. Even the Government Accountability Office (GAO) got involved in 2003, presenting a report to Congress indicating that insurance premium rates had risen primarily due to claim losses. These losses, combined with investment income decreases and low premium prices offered during times of intense competition, resulted in some insurers leaving the market or becoming insolvent. This resulted in fewer options and less competition.  Nearly a decade later, in 2012, $3.6 billion was paid out in 12,142 medical malpractice claims, with 93 percent coming from settlements.

Defensive medicine

In an attempt to avoid malpractice suits altogether, doctors practice what is known as defensive medicine. Even if they are comfortable with a diagnosis, they may order additional tests to cover their bases, just in case. Surveys have revealed that as many as 75 percent of doctors order these extra unnecessary tests, which could add up to about $650 billion each year, or one in four health care dollars. This expensive idea has at least some merit: Florida data from 2000 to 2009 showed that when hospitals billed more for a patient’s case, the doctor was less likely to be sued. Even when tort reform resulted in caps on damages or early offers of compensation prior to litigation, doctors did not feel comfortable abandoning defensive medicine practices. The PCS system, however, prevents doctors from being sued altogether. In theory, it could completely eliminate the practice of defensive medicine.

Patient Compensation System

The PCS creates a no-fault administrative system comprised of medical experts that review claims. This alternate system would ease the burden on the courts, and would be funded through liability premiums. Evidence shows that medical malpractice attorneys are reluctant to take cases that are likely to have a low payout, but the administrative system would allow those who have been less seriously harmed to recover for their injuries. The Patients for Fair Compensation organization has been fighting for this type of reform, emphasizing the lack of fairness in the current system and its contribution to rising health care costs through the practice of defensive medicine. The organization argues for the likelihood of cost saving through eliminating costs of litigation and the increased predictability of patient awards.

Tennessee bill

In 2015, the bill’s sponsors, Representative Glen Casada and Senator Jack Johnson attempted to garner support for the PCS through a Tennessean article, emphasizing how much of the out-of-pocket burden consumers are bearing due to soaring health costs. They argued that the current tort system is broken, and that Tennessee residents spend $13 billion annually on defensive medicine with employers coughing up $4.6 billion of the amount. They projected that the PCS would save employers between $25 and $30 billion over ten years. Recently, another Tennessean article written by a hospital administrator of 40 years brought up the topic again. He stated that hospital administrators are not able to prevent doctors from practicing defensive medicine, and that the majority of physicians he has known have been sued and many, frivolously. Yet the Tennessee Medical Association  (TMA) and the Steve Volunteer Mutual Insurance Company (SVIMC) strongly oppose the PCS model, believing that costs would actually dramatically increase. TMA and SVIMC said that the current system is actually working and the PCS is “an untested system with significant flaws.”

New hearing aid uses lasers, direct eardrum stimulation

Hearing aids have been around since the very end of the 1800s, but surely none of the first users imaged that the devices would eventually use lasers. On September 29, 2015, the FDA approved a new type of hearing aid for marketing that combines laser pulses and direct eardrum stimulation to amplify sound. The EarLens Contact Hearing Device™ (CHD) has received an indication for use in adults with mild to severe hearing impairment.

How does it work?

This device depends on two different parts working in unison. A tympanic membrane transducer (TMT) is placed on the eardrum (non-surgically) while an audio processor sits on the outer ear. The audio processor is connected to an ear tip containing a laser diode, which is placed into the ear canal. When the behind-the-ear (BTE) processor receives external sound waves, it converts them to low electronic signals that are sent to the ear tip. The signals are converted to pulses of light, which shine onto the TMT’s photodetector. The photodetector converts the light back into electronic signals and then transmits the sound vibrations onto the ear drum.

How is it different?

There are already multiple types of hearing aids. Some sit in the ear (ITE), some in the canal (ITC) and some behind the ear.  Older analog hearing aids simply amplified sounds, and some users struggled with them because all sounds were equally amplified by the device’s microphone. Some of these aids are programmable to hold separate settings for various environments, but they are not as sensitive to sounds as digital aids. Digital aids contain a chip that analyzes sounds based on the environment and user’s degree of hearing loss. The microphone amplifies sounds with an adjustment for volume and pitch, as well as feedback.

The EarLens, by contrast, is custom molded to the eardrum. The sounds are amplified by direct stimulation of the eardrum. The FDA believes that this is a new option for amplifying sounds over many frequencies.

Safety and effectiveness

The EarLens was studied over a four-month period for safety and effectiveness. The trials assessed residual hearing stability, amplification gain, and improved word recognition. Users’ ability to hear sentences in background noise with the device was compared to listening without any amplification. After a month of using the device, the 48 subjects experienced word recognition improvement by about a third. They also experienced a significant functional gain in the high frequency range. A maximum of 68 decibels was gained in the 9000-10,000 Hz range, which the FDA notes is not usually achieved with conventional hearing aids. There were some ear canal abrasions experienced, mainly due to the ear tip or forming the impressions. However, no serious adverse events were reported.

Who pays?

Medicare does not cover routine hearing exams or hearing aids. Part B will cover some diagnostic hearing exams if a doctor order these tests (20 percent of the Medicare-approved amount, along with the Part B deductible). Some Medicare Advantage plans may have some sort of hearing coverage. Only a few private insurance companies cover hearing aids, although three states (Arkansas, New Hampshire, and Rhode Island) require coverage for adults. This can be a problem for patients who suffer hearing loss, as prices can range up to thousands of dollars for one aid.

A House bill was introduced in March 2015 (H.R. 1653) proposing to repeal the Medicare hearing aid exclusion. After it was introduced, the Government Accountability Office (GAO) was instructed to study financial aid programs for hearing aids, as well as related examinations for patients suffering hearing loss.