Congress Votes to Override President’s Veto of the Medicare Bill – On Tuesday, July 15, the House and Senate voted to override the President’s veto of Medicare legislation (H.R. 6331) which prevented a 10.6 percent cut in Medicare physician payments. The bill, which earlier passed both the House and Senate by greater than the two-thirds majority needed to defeat a veto, was nonetheless vetoed by President Bush on July 15. Later the same day, the House voted 383-41 to override the veto. The Senate followed, voting 70-26 to override. As a result, the Centers for Medicare & Medicaid Services (“CMS”) on July 16 announced plans to implement the provisions of the new law.
With respect to physician payment, the 10.6 percent payment reduction is replaced by the 0.5 percent increase earlier implemented in the Physician Fee Schedule. The durable medical equipment (DME) competitive bidding program, scheduled to take effect July 1 of this year, is now delayed until 2009. In addition, the exceptions for outpatient therapy caps which expired on June 30, 2008 have been reinstated by the new law. In order to cover the cost of the physician fee increase, Congress reduced payments to Medicare Advantage plans, which, on average, cost 13 percent more than traditional Medicare. For more information, see the CMS press release posted on the agency’s web site by clicking here. Reporter, Robert E. Waters, Washington, D.C., 202-626-9127 or rwaters@kslaw.com.
Providence Health & Services Enters into First Resolution Agreement With HHS to Resolve Alleged HIPAA Violations – On July 17, 2008, the United States Department of Health & Human Services posted a press release on its website announcing that the Office of Civil Rights and the Centers for Medicare and Medicaid Services (collectively, HHS) had entered into a resolution agreement with Washington-based Providence Health & Services to settle allegations that two Providence entities had violated Privacy and Security Rules under the Health Insurance Portability and Accountability Act (HIPAA). Providence is a non-profit health system that includes 26 hospitals located in the northwestern U.S. While HHS has previously required covered entities alleged to have violated HIPAA Privacy and Security rules to implement corrective measures, this is the first time HHS has required a covered entity to enter into a resolution agreement to resolve an alleged HIPAA violation.
According to HHS’s press release, the resolution agreement resolved several incidents between September 2005 and March 2006 in which laptops, backup tapes, and optical disks containing unencrypted protected health information were lost by Providence employees or stolen from Providence employees after being left unattended. Under the agreement, Providence agreed to (i) pay HHS $100,000 and (ii) enter into a 3-year corrective action plan (CAP) which requires Providence to, among other things, implement detailed HIPAA policies and procedures regarding HIPAA safeguards, provide training to its employees regarding the safeguards, and submit annual reports to HHS regarding its compliance with the CAP.
While HHS has been reluctant to impose monetary sanctions against covered entities alleged to have committed HIPAA violations, the resolution agreement suggests the agency will impose such sanctions in situations involving repetitive and/or severe HIPAA infractions. HHS’s press release can be accessed by clicking here. The CAP can be accessed by clicking here. Reporter, Adam Robison, Houston, 713-276-7306, arobison@kslaw.com.
CMS Finds RAC Pilot Project Recouped $693.6 Million in Overpayments – On July 11, 2008, the Centers for Medicare and Medicaid Services (“CMS”) issued a press release and report: The Medicare Recovery Audit Contractor Program: An Evaluation of the 3-Year Demonstration, which found that “Recovery Audit Contractors” (“RACs”) had recouped nearly $700 million back to Medicare over three years. As a part of the Medicare Prescription Drug, Improvement and Modernization Act of 2003, Congress required CMS to conduct a 3 year demonstration project to engage RACs to review past claims submitted by providers to detect improper payments in the Medicare fee for service program. The demonstration project–conducted in California, New York, Massachusetts, Florida, and South Carolina–ended in March 2008. Based on these results, CMS indicated that the RAC program “has proven to be successful returning dollars to the Medicare program.” The text of the CMS press release is accessible by clicking here and the Report is available by clicking here.
CMS will begin implementation of the nationwide RAC program in the coming months based on a congressional mandate in the Tax Relief and Health Care Act of 2006. Nevertheless, some providers are challenging the structure and results of the RAC program. In South Carolina, 32 hospitals filed a lawsuit against CMS alleging unlawfully recouped payments. AnMed Health v. Leavitt, No. 8:08-cv-02453-HFF, D.S.C. filed July 3, 2008. According to the complaint, the majority of the money recouped was based on RAC determinations that inpatient hospital services were medically unnecessary. The hospitals allege that CMS allowed the RACs to use different standards for evaluating medical necessity than CMS requires the providers to use. House Democrats are also calling for a GAO probe of the RAC program. Notably, the RACs in the demonstration project were paid on a contingency fee basis–the more the RAC recovered, the higher the fee payable to the RAC–providing an incentive for the RACs to be aggressive in recovering funds. In response to criticism, CMS has changed the payment structure, and RACs in the nationwide program will not be paid on a contingency basis.
In its report, CMS concluded that 96% of the improper payments were overpayments, with only 4% underpayments. Given OIG’s compliance guidance that provider claims review initiatives should focus on both underpayments and overpayments, in the nationwide roll out of the program, RACs should be contractually required to search diligently for both underpayments and overpayments as part of their claim reviews. Reporter, Tom Hawk, Atlanta, 404-572-4704, thawk@kslaw.com.
Seventh Circuit Upholds Dismissal of Claim that Attorney Stole Information to Bring False Claims Act Suit – In a July 7, 2008 order, the Seventh Circuit upheld the dismissal of a suit by a podiatrist Dr. John Cain claiming that Ronald Osman, an attorney he had consulted previously, committed fraud when Osman reviewed Cain’s files, told Cain he did not believe there was a viable False Claims Act case, and subsequently filed a qui tam action on behalf of an individual identified in Cain’s files. In1998, Cain approached Osman about filing a qui tam action against General American Life Insurance Company, based on Cain’s claims that he had acquired information as a Medicare provider that would support such a suit against General American. Cain provided Osman with 400 pages of files, which included the name Harry Riggs, a former General American employee. Osman reviewed the files, declined to pursue the case on Cain’s behalf, and ten months later filed a False Claim Act case on behalf of Harry and Nancy Riggs as relators. The case ultimately was settled for more than $70 million. Cain then sued Osman on theories of Illinois torts of fraud, outrage, bad faith, and conspiracy, claiming that Osman had taken information from his files on which Osman relied to file the suit for the Riggses, thereby cheating Cain out of millions of dollars.
The court concluded that although the actions might suggest an ethical breach of Osman’s duty of confidentiality to a prospective client, they did not rise to the level of fraud. The court explained that Osman’s statement that he did not believe Dr. Cain had a “viable action under the False Claims Act” was the expression of a legal opinion, not one of fact that could support a claim for fraud. The court also declined to reverse the district court’s rejection of the outrage, bad faith, and conspiracy claims. The text of the opinion is accessible by clicking here. Reporter, Mike Paulhus, Atlanta, 404-572-2860, mpaulhus@kslaw.com.
OIG Implements Rule Changing Payment Procedure For Advisory Opinions – Effective July 17, 2008, requests for advisory opinions from The Office of Inspector General of the Department of Health & Human Services (“OIG”) no longer must be accompanied by a $250 deposit. Requestors must still pay for the cost of OIG’s preparation of the opinion, and the total cost must be remitted directly to the U.S. Treasury by wire or electronic funds transfer before OIG will issue the opinion. OIG received no comments to the interim final rule published March 26, 2008. The text of the final rule is accessible by clicking here. Reporter, Mike Paulhus, Atlanta, 404-572-2860, mpaulhus@kslaw.com.
This bulletin provides a general summary of recent legal developments. It is not intended to be and should not be relied upon as legal advice.
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