Equities rest with agency in administrative enforcement actions

Administrative enforcement is quicker than an investigation but still “deadly” for the provider or supplier, concluded Judith Waltz, partner at Foley & Lardner LLP, at the American Health Lawyers Association’s 2017 Institute on Medicare and Medicaid Payment Issues. “Administrative enforcement” means the tools available to HHS, CMS, and the HHS Office of Inspector General (OIG) without or with limited formal involvement of the Department of Justice, including civil money penalties (CMPs), payment suspensions, and billing privilege or enrollment denials and revocations. In administrative enforcement actions, the equities and more discretion may rest with the agency, and a lesser burden of persuasion applies for the agency to prove its case.

Exclusion regulations

In December 2016 the OIG revised its exclusion regulations (see 81 FR 88334) in part to implement the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). Waltz explained that the Final rule did the following: (1) expanded its permissive exclusion authority for convictions related to obstruction of an investigation to include audits; (2) added permissive exclusion authority for making false statements, omissions, or misrepresentations in enrollment applications; (3) added early reinstatement for loss of license in a different state; and (4) added a 10-year look-back period for exclusions.

Inflation

Waltz noted that CMPs are being updated annually for inflation pursuant to a final rule issue in December 2016 (see 45 C.F.R. Part 102). For example, a CMP for failing to grant timely access is up to $15,000 per day, $16,312 after inflation, and the CMP for false statements, omissions, or misrepresentations in enrollment or similar documents is up to $50,000 per false statement, $54,732 after inflation. Waltz said, “After inflation, numbers are unbelievable.”

Feds snare 16 hospice providers in $60M Medicare fraud scheme

Sixteen individuals were charged with offenses related to a health care fraud scheme in a federal court in Texas. The scheme alleges that from July 2012 to September 2016, Novus Health Services, owned and operated by the 16 individuals, billed Medicare and Medicaid more than $60 million for fraudulent hospice services, of which more than $35 million was paid to Novus. The individuals submitted false claims for hospice services and continuous care hospice services, recruited ineligible hospice beneficiaries via kickbacks to physicians and health care facilities, and falsified and destroyed documents to conceal these activities. The grand jury indictment was the result of an investigation into Novus by the Federal Bureau of Investigation, HHS Office of Inspector General (OIG), and the Texas Attorney General’s Medicaid Fraud Control Unit (MFCU).

Scheme

Novus and Optim Health Services, Inc. were operated and co-owned by one of the individuals, a certified public accountant without any medical licenses. Licensed physicians who were paid Novus medical directors provided little to no oversight of Novus’s hospice patients. Some of the indicted individuals were not physicians and they would determine whether a beneficiary would be certified for, recertified for, or discharged from hospice; whether they would be placed on continuous care; and how and to what extent they would be medicated with drugs. These decisions on medical care were often driven by financial interest rather than patient need.

The scheme also involved directing that beneficiaries be placed on continuous care, whether the beneficiaries needed the service or not, and often without any consultation with a physician. Continuous care physician’s orders were falsified and uploaded into Novus’s electronic medical records database. When a beneficiary was on continuous care, the Novus nurses would unnecessarily administer high doses of Schedule II controlled medications such as morphine or hydromorphone. The Schedule II medications were obtained with prescription forms unlawfully pre-signed by medical directors. The investigators found instances when these excessive dosages resulted in serious bodily injury or death to the beneficiaries.

If convicted, each count of conspiracy to commit health care fraud and substantive health care fraud count carries a maximum statutory penalty of 10 years in federal prison and a $250,000 fine.

Structure call coverage arrangements to avoid Stark & AKS issues

When compensating physicians for the time they spend on-call, hospitals should draft call coverage agreements with care to avoid potential problems implicating federal laws prohibiting physician self-referral (Stark Law) and kickbacks (Anti-Kickback Statute (AKS)). In a webinar presented by the Health Care Compliance Association (HCCA), Robert G. Homchick, partner at Davis Wright Tremaine LLP, and Scott M. Safriet and Adam S. Polsky, partners at HealthCare Appraisers, Inc., discussed changes to the call coverage risk analysis based on court opinions and changes in government implementation of rules.

As with most physician compensation arrangements, the Stark Law (42 U.S.C. §1395nn) is the threshold issue when analyzing call coverage agreements; additionally, if the agreement passes muster under Stark, the AKS (42 U.S.C. §1320a-7b) risks should be relatively modest. Both analyses contain some of the same considerations, such as fair market value (FMV) and commercial reasonableness.

Homchick, Safriet, and Polsky noted the following concerns for call coverage:

  • on-call coverage is becoming more expensive, but hospitals are facing decreased reimbursement; and
  • because traditional methods of securing call coverage no longer apply to all situations, hospitals are becoming more creative to obtain coverage.

To effectively secure coverage, hospitals should consider many options, and determine which is best applied in their situation. Potential coverage options include concurrent coverage, telemedicine, bundling on-call coverage with services beyond the emergency room, on-call coverage payment for employed physicians, and use of the “activation fee” concept.

However, the webinar cautioned that not all arrangements are the same, and in situations where it is truly difficult to secure coverage, a different approach may be necessary. Additionally, hospitals should look into the underlying reasons of why securing that coverage has been difficult—for example, are there shortened response times, a physician shortage in the marketplace, or is coverage restricted or quasi-restricted.

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.