Kusserow on Compliance: OIG Calls for Re-Examination of Critical Access Hospital Payment System

  • Medicare Beneficiaries Pay Half of the Costs for Outpatient Services at CAHs
  • Beneficiaries Pay Two to Six Times More than for Same Services at Acute Care Hospitals

The HHS Office of Inspector General’s (OIG) Office of Evaluation and Inspection (OEI) released a report on critical access hospitals (CAHs), calling for modification of how coinsurance is calculated for outpatient services received at CAHs that would reduce the current reimbursement amounts. The OIG cited higher costs Medicare beneficiaries pay when services are received at a CAH, than for the same services at acute care hospitals. This follows another OIG report from last year. Now these two reports stand back to back with a call for a review of critical access criteria for hundreds of small rural hospitals across the nation. Needless to note, there will be a lot of reaction from rural healthcare providers on this subject, as there was when the first report came out.

CAH Background

The CAH certification was created to ensure that rural beneficiaries would have access to hospital services, with Medicare reimbursing them 101 percent of “reasonable costs.” This is instead of payments made at the predetermined rates set by the Outpatient Prospective Payment System (OPPS). The system that Medicare uses to calculate outpatient coinsurance amounts for beneficiaries who receive services at CAHs differs from that used for beneficiaries who receive services at acute care hospitals. Beneficiaries who receive services at CAHs pay coinsurance amounts based on CAH charges, whereas beneficiaries who receive services at acute care hospitals pay coinsurance amounts based on OPPS rates. CAH charges are typically higher than the reasonable costs associated with CAH services or the OPPS rates that acute-care hospitals receive.

OIG Findings

The OIG reviewed claims data to calculate the percentages and amounts of coinsurance that Medicare beneficiaries paid toward the costs of outpatient services at CAHs. This data was compared to what it would be if beneficiaries paid at acute-care hospitals for the 10 most common outpatient services provided at CAHs. The OIG found that as result of coinsurance amounts being based on charges, Medicare beneficiaries paid nearly half the costs for outpatient services at CAHs. Because coinsurance amounts were based on charges, Medicare beneficiaries paid a higher percentage of the costs in coinsurance for outpatient services received at CAHs than they would have paid at hospitals under OPPS. For the 10 frequently provided outpatient services at CAHs, beneficiaries paid between two and six times the amount in coinsurance that they would have for the same services at acute care hospitals.

OIG Recommendations

To reduce the percentage of costs that Medicare beneficiaries pay in coinsurance, the OIG recommended that CMS seek legislative authority to modify how coinsurance is calculated for outpatient services received at CAHs. The OIG offered suggestions as to how CMS could modify how coinsurance is calculated for such services. These included:

  1. Computing coinsurance so that it is based on interim payment rates rather than charges, and
  2. Processing claims for outpatient services at CAHs as if they were paid under OPPS for the purpose of calculating an OPPS equivalent coinsurance.

CMS neither concurred, nor non-concurred with the OIG recommendation, preferring to sit on the sidelines for the time being; however, it is likely that CMS will eventually have to re-examine how CAH qualifications are defined and its current system of payments for CAHs.

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 © 2014 Strategic Management Services, LLC. Published with permission.

Kusserow on Compliance: Hospital President Convicted of $158 Million Medicare Fraud

It is not often a hospital CEO is convicted of felony charges. This is the case in Houston, where a federal jury convicted Earnest Gibson III, the former president of Riverside General Hospital (Riverside) of conspiracy to commit health care fraud; conspiracy to commit money laundering; and conspiracy to pay kickbacks, as well as related counts of paying and receiving illegal kickbacks. Other members of the conspiracy included his son, Earnest Gibson IV, the operator of one of Riverside’s satellite locations, and Regina Askew, a group home owner. Robert Crane, a patient recruiter, was convicted of conspiracy to pay and receive kickbacks. Ten defendants have now been convicted in connection with the fraud scheme involving false claims for mental health treatment. The scheme submitted $158 million in claims to Medicare for partial hospitalization program (PHP) services purportedly provided by the hospital to the recruited beneficiaries, when in fact, the PHP services were medically unnecessary or never provided. The proceeds from the health care fraud were used to promote the scheme by paying kickbacks to patient recruiters and owners of group homes in exchange for sending Medicare beneficiaries to the hospital’s PHPs.

The Department of Justice noted that the conspiracy “systematically defrauded Medicare, treating mentally ill and disabled Americans like chits to be traded and cashed out to pad their own pockets. For over six years, the Gibsons and their co-conspirators stuck taxpayers with millions in hospital bills, purportedly for intensive psychiatric treatment. But the ‘treatment’ was a sham—some patients just watched television all day, others had dementia and couldn’t understand the therapy they supposedly received, and other patients never even went to the hospital at all”.

Evidence presented at trial indicated the defendants caused the submission of false and fraudulent claims for PHP services to Medicare through the hospital. A PHP is a form of intensive outpatient treatment for severe mental illness. Medicare beneficiaries for whom Riverside and its satellite locations billed Medicare for PHP services did not qualify for or need PHP services. Moreover, they rarely saw a psychiatrist and did not receive intensive psychiatric treatment. In fact, some of the Medicare beneficiaries were suffering from Alzheimer’s and could not actively participate in any treatment even if they actually qualified to receive PHP services. Furthermore, kickbacks were paid to patient recruiters and to owners and operators of group care homes, in exchange for those individuals delivering ineligible Medicare beneficiaries to the hospital’s PHPs. Patient recruiters were also paid in exchange for delivering ineligible Medicare beneficiaries to the specific PHP.

Riverside General Hospital, a psychiatric hospital with 88 beds, is a historic institution in Houston. It was the subject of adverse action last August when they were forced to surrender its substance abuse treatment license. It has been speculated that the very survival of the hospital is questionable.

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.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

Copyright © 2014 Strategic Management Services, LLC. Published with permission.

Lawmakers Launch Warning to HHS Regarding Skyrocketing Generic Drug Prices

A letter urging the federal government to address “staggering increases” in the cost of generic drugs was sent to HHS Secretary Sylvia Burwell by Senator Bernie Sanders (I-Vt.) and Representative Elijah E. Cummings (D-Md.). The letter asks for the assistance of HHS in addressing significant and rapid increases in generic drug prices, which the lawmakers say are negatively affecting Medicare, Medicaid, hospitals, nursing homes, and individuals across the country. The letter warns action must be taken immediately to protect access to historically affordable generic drugs that countless Americans rely on.

Rising Prices

According to the letter, the Healthcare Supply Chain Association (HSCA) recently revealed that certain drugs have undergone enormous increases in prices. For example, a bottle of 100 2mg pills of the asthma drug albuterol sulfate was available October 2013 for $11, whereas, by April 2014, the cost of the same bottle had risen to $434. Over that same period of time, a bottle of 500 100mg tablets of the antibiotic doxycycline hyclate rose from $20 to $1,849. According to the lawmakers’ letter, the HSCA has documented at least eight generic drugs that have seen price increases of more than 400 percent between October 2013 and April 2014.

Impact

To demonstrate the impact of the rising prices, the letter points to 1,500 stories that Senator Sanders and Representative Cummings received from individuals in the two week time period that they spent investigating the issue. Additionally, the letter points to the impact that the price hikes are having on industry. The letter gives the example of a recent report, which indicated that two Walgreens executives were let go for underestimating the cost of generic drug price increases by $1 billion.

Request

In light of the price increases, the letter requests that HHS provide lawmakers with the National Average Drug Acquisition Cost data maintained by CMS, so that the lawmakers can attempt to better understand and address the price increase trends. The letter also inquires as to the steps that HHS is taking to combat the price increases, the authority that HHS has to address the problem, and whether legislative action is required. In addition to writing to HHS, the lawmakers sent letters to 14 different generic drug manufacturers to ask why the prices those manufacturers are charging for generic drugs have increased so significantly in such a brief period of time.

Nursing Homes Under Fire for Lack of Sprinklers

CMS has indicated that as many as 385 nursing homes in 39 states have failed to meet requirements to install sprinkler systems to combat potentially deadly fires in those facilities. According to the Associated Press, the nursing homes with the non-compliant sprinkler systems house 52,000 patients who are being put at unnecessary risk of deadly nursing home fires.

“Sprinklered”

The lack of sprinklers poses a compliance problem for some nursing homes because of a deadline set by CMS requiring all nursing homes to be “sprinklered” by August 13, 2013. CMS warned that it would not grant extensions for the timeline that was officially set out in a 2008 final rule (73 FR 47075). According to the Associated Press, CMS has indicated that compliance has reached 97 percent, with 3 percent of facilities falling out of compliance on the sprinkler mandate. CMS reportedly told the Associated Press that “CMS and states are actively engaging with the rest of the facilities to verify their compliance with this regulation and will take appropriate actions for noncompliance to ensure the safety of residents.”

Slow Compliance

The path to sprinklers in nursing homes has been a slow one. In 2003, attention was brought to the issue when two nursing homes, without sprinkler systems, burned and left 31 people killed. One of the nursing homes that caught fire was the Greenwood Nursing Home in Hartford, Connecticut and the other facility was the NHC Healthcare Center in Nashville, Tennessee.  Although at the time of those fires, newly constructed facilities were required to have sprinkler systems, older facilities were not required to be retrofitted. In 2008, CMS issued the requirement that all nursing homes were to install sprinklers and gave the lengthy five year deadline for compliance. Despite the slow start, the numbers have improved from last December when, according to the Associated Press, CMS reported that 714 homes lacked adequate sprinkler systems.

Cost

One reason for the lack of compliance is the cost associated with the installation of adequate sprinklers. For example, in 2003, following the Greenwood fire, the estimated cost of installing sprinklers ranged from $270,000 to $363,000 depending on whether a system needed to be upgraded or no system was in place at all.

CMS Action

According to the Associated Press, CMS indicated that it could resolve continued non-compliance with the sprinkler requirement by denying payment and terminating a facility’s provider agreement. The agency did state that some providers may receive extensions due to extenuating circumstances if, for example, nursing homes are undergoing major renovations. Regardless of the action CMS takes to enforce the sprinkler requirement, compliance is important. The Government Accountability Office indicated in a 2004 report that no facility fully equipped with sprinklers has ever had a multiple casualty fire. Simply put, sprinklers save lives. In the words of Tom Burke, a spokesman for the American Health Care Association, the value of sprinklers as a “safety and patient safety feature is undisputed.