Health Spending Sprung in Spring, But Not As Much as Expected

Health revenues increased steadily in the second quarter of 2014, yet the rise did not meet expectations of increased expenditures after the implementation of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). The numbers indicating a steady rise in services provided and payments collected by providers were based on data gathered as part of the U.S. Census Bureau’s latest Quarterly Service Report for the second quarter of 2014.

Census Report

The U.S. Census Bureau report contained quarterly estimates for selected service industries for the second quarter of 2014. Included in the selected industries was data for health care and social assistance. Specifically, the report concluded that, “the estimate for U.S. health care and social assistance revenue for the second quarter of 2014, not adjusted for seasonal variation, or price changes, was $565.6 billion, an increase of 3.0 percent…from the first quarter of 2014 and up 3.7 percent…from the second quarter of 2013.” Notably, it was recorded that while some sectors of the health industry saw significant growth, such as the increase of hospital revenue by 4.9 percent, other areas barely experienced any growth at all. For instance, the revenue increase in physician’s offices from the second quarter of 2014 compared to the second quarter of 2013 was just 0.6 percent.

Previous Projections

While the increases in revenue recorded by the Census Bureau were thought to describe an overall positive change in the health care spending arena, according to some projections the data was disappointing. A Kaiser Family Foundation article noted that increases were lower than what CMS and at least one non-profit health care spending organization expected. Indeed, earlier this month on September 3, 2014, CMS announced that it expected health care spending growth to “accelerate” and for 2014, it was estimated that the growth percentage rate would be 5.6 percent as 9 million more Americans will likely gain insurance through the expansion of Medicaid and by coverage through enrollment in the Health Insurance Marketplace.

Kusserow’s Corner: HHS Provides Further Clarification for Certification of EHR

Health information technology (HIT) developers, providers and consumers will get more flexibility through a Final rule issued by the Office of the National Coordinator for HIT (ONC) at HHS.  The purpose of the ONC is to ensure that electronic health record (EHR) technologies meet the standards and certification criteria to allow providers and hospitals to achieve meaningful use and participate in the CMS EHR Incentive Programs. CMS manages the CMS EHR Incentive Programs and meaningful use. The CMS EHR Incentive Programs provide incentive payments to Eligible Professionals (EPs) and Eligible Hospitals (EHs) as they adopt certified EHRs and successfully achieve meaningful use. CMS establishes the meaningful use objectives and measures which EPs and EHs must achieve in order to qualify for incentive payments. The standards, implementation specifications, and certification criteria establish the minimum requirements that certified EHR technologies must include to support the achievement of these objectives and measures

The Office of Certification was established to develop and oversee national programs for the certification of health information technology by the HITECH Act. HIT certification provides assurance to purchasers and other users that an EHR system offers the necessary technological capability, functionality, and security to help them meet meaningful use objectives and measures.  Certification also gives providers and patients confidence that the HIT products and systems they use are secure and can work with other systems to share information (interoperability).

The Final rule is designed to add flexibility as well as clarity and improvements to the current 2014 Edition EHR certification criteria and the ONC HIT Certification Program through a new “release” of optional and revised criteria. In effect, the certification criteria and program updates included in the new release under the Final rule were proposed earlier this year; in response to public comments received, the Final rule provides alternative certification criteria and approaches for the voluntary certification of HIT.

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.

SNFs Accused of Billing for Unnecessary Services Settle for $3.75 Million

Two skilled nursing facilities (SNFs) that were alleged to be involved in a scheme of billing and submitting claims for unnecessary and unreasonable rehabilitation services, executed a settlement agreed that stated it would pay $3.75 million to the government. Life Care Services, LLC (LCS) and Core Care V, LLP doing business as ParkVista (ParkVista), were reportedly accused of retaining RehabCare Group East, Inc. (RehabCare), to provide such services and of failing to prevent RehabCare’s “practices designed to inflate Medicare reimbursement.”

LCS and ParkVista

LCS is described by the Department of Justice (DOJ) as a manager of SNFs; it is located in Des Moines, Iowa. ParkVista is a SNF located in Fullerton, California. According to the DOJ, LCS operated ParkVista as well as an additional Massachusetts facility and that LCS suggested that the these facilities hire RehabCare and, in turn, caused ParkVista and the Massachusetts to submit the false claims created by improper billing practices.


Specifically, the government accused LCS and ParkVista of several improper billing practices including: (1) presumptively placing patients in the highest reimbursement level of therapy without giving credence to each patient’s individualized evaluations showing their specific level of required care; (2) after placing patients in the highest reimbursement level of therapy, only providing the minimum number of minutes for that therapy and discouraging any therapy beyond that minimum time; (3) “arbitrarily shifting the number of minutes of planned therapy between therapy disciplines to ensure targeted reimbursement levels were achieved;” and (4) rounding and estimating minutes for reporting. In general, the government contended that these practices resulted in the submission of false claims to Medicare for unnecessary and unreasonable services.

Case Details

The case against LCS and ParkVista was handled by the U.S. Attorney’s Office for the District of Massachusetts and the DOJ Civil Division’s Commercial Litigation Branch as well as HHS, the HHS Office of Inspector General, and the FBI. According to the DOJ, the identification of the alleged wrongdoing in this matter and the subsequent settlement is a result of the efforts of the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which is part of a joint effort of the Attorney General and the Secretary of HHS. CMS Medicare fraud outreach materials note that HEAT was established to “build and strengthen existing programs combatting Medicare fraud while investing new resources and technology to prevent fraud and abuse.”

FDA Acts to Smoke Out Online Tobacco Sales

On September 5, 2014, the FDA issued Warning Letters to four internet retailers that allegedly sold tobacco products to minors. The letters also allege other violations of the law, including misbranding, adulteration, and failure to include required health warnings. The letters direct each of the internet retailers to respond within 15 business days describing each corrective action it has taken and its plan to maintain compliance and stating the date that it discontinued each violation.

Sales to Minors

Federal regulations at 21 CFR sec. 1140.14 prohibit the sale of tobacco products to minors. Section 903(a)(7)(B) of the Food Drug and Cosmetic Act (FDC Act) provides that any tobacco product sold in violation of FDA regulations is misbranded. All four online retailers are alleged to have sold tobacco products to minors in violation of 21 CFR sec. 1140.14(a).

Modified Risk” Products

The sale of a “modified risk tobacco product” is not permitted without an FDA Order under FDC Act sec. 911(a). A modified risk tobacco product is labeled or referred to in marketing material as presenting a reduced health risk when compared to another commercial tobacco product. Typically, these products include cigarettes labeled as “light,” “lite,” or “mild” and smokeless tobacco. A modified risk tobacco product that is offered for sale in the United States without the required order is deemed adulterated. The owner of and was alleged to have violated these requirements with respect to smokeless tobacco. The owner of and, and the owner of and were alleged to have violated the requirement with respect to cigarettes.

Omission of Required Health Warnings

The FDA alleged that the smokeless tobacco products sites lacked required health warning statements in violation of 15 U.S.C. sec. 4402. The alleged violators were,,,, and

Unlawful Flavoring

Some site owners also were alleged to have marketed tobacco products with flavorings that are prohibited under FDC Act sec. 907(a)(1). The statute permits only tobacco and menthol flavorings. The letter to and alleged the unlawful sale of mint-flavored cigarettes, while and offered several cigarettes purporting to have added coffee or apple mint flavoring. The FDA stated that these products were adulterated under FDC Act sec. 902(5); alternatively, if the products do not contain the flavorings listed on the label, they are misbranded under FDC Act sec. 903(a)(1) or (a)(7).