Category Archives: Federal Law

CMS Overlooks a Settlement Agreement from 2013 : A 2021 Provider Must Defend!

Today I am talking about a settlement agreement between CMS and the skilled nursing community, which, apparently, CMS conveniently forgot about – just recently. The Jimmo settlement agreement re-defines medical necessity for skilled nursing, especially for terminally, debilitating diseases, such as multiple sclerosis (“MS”). According to CMS/the MAC auditor, my client, who serves 100%, MS patients on Medicare owes over half a million dollars. The alleged overpayment and audit findings are in violation of the Jimmo Settlement and must cease.

My client received correspondence dated February 25, 2021, regarding CMS Inquiry #2349 that re-alleged an overpayment in the amount of $578,564.45, but the audit is in violation of the Jimmo Settlement with CMS. One basis for the claims denials is that “There is doc that the pt. has a dx of MS with no doc of recent exacerbation or change in function status.” After the first level of appeal, on June 8, 2021, the denial reason was as follows:

“The initial evaluation did not document there was an ACUTE exacerbation of this chronic condition that would support the need for skilled services.” This basis is in violation of the Jimmo Settlement. See below excerpt from the Jimmo Settlement.

In January 2013, the Centers for Medicare & Medicaid Services (“CMS”) settled a lawsuit, and the “Jimmo” Settlement Agreement was approved by the Court. Jimmo v. Sebelius, No. 5:11-CV17 (D. Vt., 1/24/2013). The Jimmo Settlement Agreement clarified that, provided all other coverage criteria are met, the Medicare program covers skilled nursing care and skilled therapy services under Medicare’s skilled nursing facility, home health, and outpatient therapy benefits when a beneficiary needs skilled care in order to maintain function or to prevent or slow decline or deterioration. Specifically, the Jimmo Settlement Agreement required Medicare Manual revisions to restate a “maintenance coverage standard” for both skilled nursing and therapy services under these benefits. The Jimmo Settlement Agreement dictates that:

“Specifically, in accordance with the settlement agreement, the manual revisions clarify that coverage of skilled nursing and skilled therapy services in the skilled nursing facility (SNF), home health (HH), and outpatient therapy (OPT) settings “…does not turn on the presence or absence of a beneficiary’s potential for improvement, but rather on the beneficiary’s need for skilled care.” Skilled care may be necessary to improve a patient’s current condition, to maintain the patient’s current condition, or to prevent or slow further deterioration of the patient’s condition.”

In the case of Jimmo v. Sebelius, which resulted in the Jimmo Settlement Agreement, the Center for Medicare Advocacy (“CMA”) alleged that Medicare claims involving skilled care were being inappropriately denied by contractors based on a rule-of-thumb-“Improvement Standard”— under which a claim would be summarily denied due to a beneficiary’s lack of restoration potential, even though the beneficiary did in fact require a covered level of skilled care in order to prevent or slow further deterioration in his or her clinical condition. In the Jimmo lawsuit, CMS denied establishing an improper rule-of-thumb “Improvement Standard.”

While an expectation of improvement would be a reasonable criterion to consider when evaluating, for example, a claim in which the goal of treatment is restoring a prior capability, Medicare policy has long recognized that there may also be specific instances where no improvement is expected but skilled care is, nevertheless, required in order to prevent or slow deterioration and maintain a beneficiary at the maximum practicable level of function. For example, in the federal regulations at 42 CFR 409.32(c), the level of care criteria for SNF coverage specify that the “. . . restoration potential of a patient is not the deciding factor in determining whether skilled services are needed. Even if full recovery or medical improvement is not possible, a patient may need skilled services to prevent further deterioration or preserve current capabilities.” The Medicare statute and regulations have never supported the imposition of an “Improvement Standard” rule-of-thumb in determining whether skilled care is required to prevent or slow deterioration in a patient’s condition.

A beneficiary’s lack of restoration potential cannot serve as the basis for denying coverage, without regard to an individualized assessment of the beneficiary’s medical condition and the reasonableness and necessity of the treatment, care, or services in question. Conversely, coverage in this context would not be available in a situation where the beneficiary’s care needs can be addressed safely and effectively through the use of nonskilled personnel. Thus, such coverage depends not on the beneficiary’s restoration potential, but on whether skilled care is required, along with the underlying reasonableness and necessity of the services themselves.

Any Medicare coverage or appeals decisions concerning skilled care coverage must reflect this basic principle. In this context, it is also essential and has always been required that claims for skilled care coverage include sufficient documentation to substantiate clearly that skilled care is required, that it is provided, and that the services themselves are reasonable and necessary, thereby facilitating accurate and appropriate claims adjudication.

The Jimmo Settlement Agreement includes language specifying that “Nothing in this Settlement Agreement modifies, contracts, or expands the existing eligibility requirements for receiving Medicare coverage. Id. The Jimmo Settlement Agreement clarifies that when skilled services are required in order to provide care that is reasonable and necessary to prevent or slow further deterioration, coverage cannot be denied based on the absence of potential for improvement or restoration.

100% of my client’s consumers suffer from MS. MS is a chronic condition that facilitates a consistent decline over a long period of time. 90% of those with MS do not suffer from acute exacerbations after approximately 5 years of their initial diagnosis. They move into a new phase of their disease called secondary progressive where there are no exacerbations but a slow, consistent decline is now the clinical presentation. According to the Jimmo Settlement, there is no requirement that a provider demonstrate recent exacerbation or change of function. This has been litigated and settled. My client’s Medicare audit is in violation of the Jimmo Settlement and must cease, yet the audit must still be defended.

My client’s documents clearly demonstrate that its consumers who all suffer from MS, qualify for skilled therapy based on the Jimmo Settlement Agreement and their physicians’ recommendations. The Jimmo Settlement clearly states that if the therapist determines that skilled nursing is necessary to stop further decline, then, under the Jimmo Settlement, skilled nursing is appropriate.

Now my client is having to defend itself against erroneous allegations that are clearly in violation of the Jimmo Settlement, which is adversely affecting the company financially. It’s amazing that in 2021, my client is defending a right given in a settlement agreement from 2013. Stay proactive!

Increased Medicare Reimbursements and Nursing Home Audits

HEAR YE, HEAR YE: Medicare reimbursement rate increase!!

On April 27th, CMS proposed a rule to increase Medicare fee-for-service payment rates and policies for inpatient hospitals and long-term care hospitals for fiscal year (FY) 2022. The proposed rule will update Medicare payment policies and rates for operating and capital‑related costs of acute care hospitals and for certain hospitals. The proposed increase in operating payment rates for general acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (“IQR”) Program and are meaningful electronic health record (“EHR”) users is approximately 2.8%. This reflects the projected hospital market basket update of 2.5% reduced by a 0.2 percentage point productivity adjustment and increased by a 0.5 percentage point adjustment required by legislation.

Secondly, a sample audit of nursing homes conducted by CMS will lead to more scrutiny of nursing homes and long-term care facilities. The sample audit showed that two-thirds of Massachusetts’s nursing homes that receive federal Medicaid and Medicare funding are lagging in required annual inspections — and MA is demonstrative of the country.

237 nursing homes and long-term care facilities in the state, or 63.7% of the total, are behind on their federal health and safety inspections by at least 18 months. The national average is 51.3%.

We cannot blame COVID for everything. Those inspections lagged even before the pandemic, the data shows, but ground to a halt last year when the federal agency discontinued in-person visits to nursing homes as they were closed off to the public to help prevent spread of the COVID.

Lastly, on April 29, 2021, CMS issued a final rule to extend and make changes to the Comprehensive Care for Joint Replacement (“CJR”) model. You’ve probably heard Dr. Ron Hirsch reporting on the joint replacement model on RACMonitor. The CJR model aims to pay providers based on total episodes of care for hip and knee replacements to curb costs and improve quality. Hospitals in the model that meet spending and quality thresholds can get an additional Medicare payment. But hospitals that don’t meet targets must repay Medicare for a portion of their spending.

This final rule revises the episode definition, payment methodology, and makes other modifications to the model to adapt the CJR model to changes in practice and fee-for-service payment occurring over the past several years. The changes in practice and payment are expected to limit or reverse early evaluation results demonstrating the CJR model’s ability to achieve savings while sustaining quality. This rule provides the time needed to test modifications to the model by extending the CJR model for an additional three performance years through December 31, 2024 for certain participant hospitals.

The CJR model has proven successful according to CMS. It began in 2016. Hospitals had a “statistically significant decrease” in average payments for all hip and knee replacements relative to a control group. $61.6 million (a savings of 2% of the baseline)

Medicare Appeal Backlog Dissolves and SMRC Audits Escalate

I have good news and bad news today. I have chosen to begin with the good news. The ALJ backlog will soon be no more. Yes, the 4-6 years waiting period between the second and third level will, by sometime in 2021, be back to 90 days, with is the statutory requirement. What precipitated this drastic improvement? Money. This past year, CMS’ budget increased exponentially, mostly due to the Medicare appeals backlog. OMHA was given enough dough to hire 70 additional ALJs and to open six additional locations. That brings the number of ALJs ruling over provider Medicare appeals to over 100. OMHA now has the capability to hear and render decisions for approximately 300,000 appeals per year. This number is drastically higher than the number of Medicare appeals being filed. The backlog will soon be nonexistent. This is fantastic for all providers because, while CMS will continue to recoup the alleged overpayment after the 2nd level, the providers will be able to have its case adjudicated by an ALJ much speedier.

Now the bad news. Remember when the RAC program was first implemented and the RACs were zealously auditing, which is the reason that the backlog exists in the first place. RACs were given free rein to audit whichever types of service providers they chose to target. Once the backlog was out of hand, CMS restricted the RACs. They only allowed a 3 year lookback period when other auditors can go back 6 years, like the SMRC audits. CMS also mandated that the RACs slow down their number of audits and put other restrictions on RACs. Now that OMHA has the capacity to adjudicate 300,000 Medicare appeals per year, expect that those reins that have been holding the RACs back will by 2021 or 2022 be fully loosened for a full gallop.

Switching gears: Two of the lesser known audits that are exclusive to the CMS are the Supplemental Medical Review Contractor (“SMRC”) and the Targeted Probe and Educate (“TPE”) audits. Exclusivity to CMS just means that Medicare claims are reviewed, not Medicaid.

The SMRCs, in particular, create confusion. We have seen DME SMRC audits on ventilator claims, which are extremely document intensive. You can imagine the high amounts of money at issue because, for ventilators, many people require them for long periods of time. Sometimes there can 3000 claim lines for a ventilator claim. These SMRC audits are not extrapolated, but the amount in controversy is still high. SMRCs normally request the documents for 20-40 claims. It is a one-time review. It’s a post payment review audit. It doesn’t sound that bad until you receive the request for documents of 20-40 claims, all of which contain 3000 claim lines and you have 45 days to comply.

Lastly, in a rare act, CMS has inquired as whether provider prefer TPE audits or continue with post payment review audits for the remainder of the pandemic. If you have a strong opinion one way or the other, be sure to contact CMS.

Medicare Auditors Fail to Follow the Jimmo Settlement

Auditors are not lawyers. Some auditors do not even possess the clinical background of the services they are auditing. In this blog, I am concentrating on the lack of legal licenses. Because the standards to which auditors need to hold providers to are not only found in the Medicare Provider Manuals, regulations, NCDs and LCDs. Oh, no… To add even more spice to the spice cabinet, common law court cases also create and amend Medicare and Medicaid policies.

For example, the Jimmo v. Selebius settlement agreement dictates the standards for skilled nursing and skilled therapy in skilled nursing facilities, home health, and outpatient therapy settings and importantly holds that coverage does not turn on the presence or absence of a beneficiary’s potential for improvement.

The Jimmo settlement dictates that:

“Specifically, in accordance with the settlement agreement, the manual revisions clarify that coverage of skilled nursing and skilled therapy services in the skilled nursing facility (SNF), home health (HH), and outpatient therapy (OPT) settings “…does not turn on the presence or absence of a beneficiary’s potential for improvement, but rather on the beneficiary’s need for skilled care.” Skilled care may be necessary to improve a patient’s current condition, to maintain the patient’s current condition, or to prevent or slow further deterioration of the patient’s condition.”

This Jimmo standard – not requiring a potential for improvement – is essential for diseases that are lifelong and debilitating, like Multiple Sclerosis (“MS”). For beneficiaries suffering from MS, skilled therapy is essential to prevent regression.

I have reviewed numerous audits by UPICs, in particular, which have failed to follow the Jimmo settlement standard and denied 100% of my provider-client’s claims. 100%. All for failure to demonstrate potential for improvement for MS patients. It’s ludicrous until you stop and remember that auditors are not lawyers. This Jimmo standard is found in a settlement agreement from January 2013. While we will win on appeal, it costs providers money valuable money when auditors apply the wrong standards.

The amounts in controversy are generally high due to extrapolations, which is when the UPIC samples a low number of claims, determines an error rate and extrapolates that error rate across the universe. When the error rate is falsely 100%, the extrapolation tends to be high.

While an expectation of improvement could be a reasonable criterion to consider when evaluating, for example, a claim in which the goal of treatment is restoring a prior capability, Medicare policy has long recognized that there may also be specific instances where no improvement is expected but skilled care is, nevertheless, required in order to prevent or slow deterioration and maintain a beneficiary at the maximum practicable level of function. For example, in the regulations at 42 CFR 409.32(c), the level of care criteria for SNF coverage specify that the “. . . restoration potential of a patient is not the deciding factor in determining whether skilled services are needed. Even if full recovery or medical improvement is not possible, a patient may need skilled services to prevent further deterioration or preserve current capabilities.” The auditors should understand this and be trained on the proper standards. The Medicare statute and regulations have never supported the imposition of an “Improvement Standard” rule-of-thumb in determining whether skilled care is required to prevent or slow deterioration in a patient’s condition.

When you are audited by an auditor whether it be a RAC, MAC or UPIC, make sure the auditors are applying the correct standards. Remember, the auditors aren’t attorneys or doctors.

Medicaid Fraud Control Units Performed Poorly During the Pandemic: Expect MFCU Oversight to Increase

OIG just published its annual survey of how well or poor MFCUs across the country performed in 2020, during the ongoing COVID pandemic. Each State has its own Medicaid Fraud Control Unit (“MFCU”) to prosecute criminal and civil fraud in its respective State. I promise you, you do not want MFCU to be calling or subpoena-ing you unexpectedly. The MFCUs reported that the pandemic created significant challenges for staff, operations, and court proceedings, which led to lower case outcomes in FY 2020. But during this past “lower than expected” recovery year, the MFCUs still recovered over $1 billion from health care providers. It was a 48% drop.

2020 MFCU Statistics at a Glance

As MFCUs initially moved to a telework environment, some staff reported experiencing challenges conducting work because of limitations with computer equipment and network infrastructure. Field work was also limited. To help protect staff and members of the public from the pandemic, MFCUs reported curtailing some in-person field work, such as interviews of witnesses and suspects. These activities were further limited because of an initial lack of personal protective equipment that was needed in order to conduct similar activities in nursing homes and other facilities. Basically, COVID made for a bad recovery year by the MFCUs. Courts were closed for a while as well, slowing the prosecutorial process.

The report further demonstrated how lucrative the MFCU agencies are, despite the pandemic. For every $1 dollar spent on the administration of a MFCU, the MFCUs rake in $3.36. In 2020, the MFCUs excluded 928 individuals or entities. There were 786 civil settlements and judgments; the vast majority of judgments were pharmaceutical manufacturers. Convictions decreased drastically from 1,564 in 2019 to 1,017 convictions in 2020.  Interestingly, looking at the types of providers convicted or penalized, the vast majority were personal care services attendants and agencies. Five times higher than the next highest provider type – nurses: LPN, RNs, NPs, and PAs.

And the award goes to Maine’s MFCU – The Maine MFCU received the Inspector General’s Award for Excellence in Fighting Fraud, Waste, and Abuse for its high number of case outcomes across a mix of case types.

OIG also established the desired performance indicators for 2021. OIG expects the MFCUs to maintain an indictment rate of 19% and a conviction rate of 89.1%.

The OIG Report Foreshadows 2021 MFCU Actions:

  1. Hospice: Expect audits. $0 was recovered in 2020.
  2. Fraud convictions increased for cardiologists and emergency medicine. Expect these areas to be more highly scrutinized, especially given all the COVID exceptions and rule amendments last year.
  3. Expect a MFCU rally. The pandemic may not be over, but with increased vaccines and after a down year, MFCUs will be bulls in the upcoming year as opposed to last year’s forced, lamb-like actions due to the pandemic.

While Medicare is strictly a federal program, Medicaid is funded with federal and State tax dollars. Therefore, each State’s regulations germane to Medicaid can vary. Medicaid fraud can be prosecuted as a federal or a State crime.

Beware the Ides of March! And Medicare Provider Audits!

Hello! And beware the Ides of March, which is today! I am going to write today about the state of audits today. When I say Medicare and Medicaid audits, I mean, RACs, MACs, ZPICs, UPICs, CERTs, TPEs, and OIG investigations from credible allegations of fraud. Without question, the new Biden administration will be concentrating even more on fraud, waste, and abuse germane to Medicare and Medicaid. This means that auditing companies, like Public Consulting Group (“PCG”) and National Government Services (“NGS”) will be busy trying to line their pockets with Medicare dollars. As for the Ides, it is especially troubling in March, especially if you are Julius Caesar. “Et tu, Brute?”

One of the government’s most powerful tool is the federal government’s zealous use of 42 CFR 455.23, which states that “The State Medicaid agency must suspend all Medicaid payments to a provider after the agency determines there is a credible allegation of fraud for which an investigation is pending under the Medicaid program against an individual or entity unless the agency has good cause to not suspend payments or to suspend payment only in part.” (emphasis added). That word – “must” – was revised from “may” in 2011, part of the Affordable Care Act (“ACA”).

A “credible allegation” is defined as an indicia of reliability, which is a low bar. Very low.

Remember back in 2013 when Ed Roche and I were reporting on the New Mexico behavioral health care cluster? To remind you, the State of NM accused 15 BH health care providers, which constituted 87.5% of the BH providers in NM, of credible allegations of fraud after the assistant AG, at the time, Larry Heyeck, had just published a legal article re “Credible Allegations of Fraud.” See blog and blog. Unsurprisingly, the suicide rate and substance abuse skyrocketed. There was even a documentary “The Shake-Up” about the catastrophic events in NM set off by the findings of PCG.

This is another example of a PCG allegation of overpayment over $700k, which was reduced to $336.84.

I was the lawyer for the three, largest entities and litigated four administrative appeals. If you recall, for Teambuilders, PCG claimed it owed over $12 million. After litigation, an ALJ decided that Teambuilders owed $836.35. Hilariously, we appealed. While at the time, PCG’s accusations put the company out of business, it has re-opened its doors finally – 8 years later. This is how devastating a regulatory audit can be. But congratulations, Teambuilders, for re-opening.

Federal law mandates that during the appeal of a Medicare audit at the first two levels: the redetermination and reconsideration, that no recoupment occur. However, after the 2nd level and you appeal to the ALJ level, the third level, the government can and will recoup unless you present before a judge and obtain an injunction.

Always expect bumps along the road. I have two chiropractor clients in Indiana. They both received notices of alleged overpayments. They are running a parallel appeal. Whatever we do for one we have to do for the other. You would think that their attorneys’ fees would be similar. But for one company, NGS has preemptively tried to recoup THREE times. We have had to contact NGS’ attorney multiple times to stop the withholds. It’s a computer glitch supposedly. Or it’s the Ides of March!

More Covered Health Care Services and More Policing under the Biden Administration!

Happy 55th Medicare! Pres. Biden’s health care policies differ starkly from former Pres. Trump’s. I will discuss some of the key differences. The newest $1.9 trillion COVID bill passed February 27th. President Biden is sending a clear message for health care providers: His agenda includes expanding government-run, health insurance and increase oversight on it. In 2021, Medicare is celebrating its 55th year of providing health insurance. The program was first signed into law in 1965 and began offering coverage in 1966. That first year, 19 million Americans enrolled in Medicare for their health care coverage. As of 2019, more than 61 million Americans were enrolled in the program.

Along with multiple Executive Orders, Pres. Biden is clearly broadening the Affordable Care Act (“ACA”), Medicaid and Medicare programs. Indicating an emphasis on oversight, President Biden chose former California Attorney General Xavier Becerra to lead HHS. Becerra was a prosecutor and plans to bring his prosecutorial efforts to the nation’s health care. President Biden used executive action to reopen enrollment in ACA marketplaces, a step in his broader agenda to bolster the Act with a new optional government health plan.

For example, one of my personal, favorite issues that Pres. Biden will address is parity for Medicare coverage for medically necessary, oral health care. In fact, Medicare coverage extends to the treatment of all microbial infections except for those originating from the teeth or periodontium. There is simply no medical justification for this exclusion, especially in light of the broad agreement among health care providers that such care is integral to the medical management of numerous diseases and medical conditions.

The Biden administration has taken steps to roll back a controversial Trump-era rule that requires Medicaid beneficiaries to work in order to receive coverage. Two weeks ago, CMS sent letters to several states that received approval for a Section 1115 waiver – for Medicaid. CMS said it was beginning a process to determine whether to withdraw the approval. States that received a letter include Arizona, Arkansas, Georgia, Indiana, Nebraska, Ohio, South Carolina, Utah, and Wisconsin. The work requirement waivers that HHS approved at the end of the previous administration’s term may not survive the new presidency.

Post Payment Reviews—Recovery Audit Contractor (“RAC”) audits will increase during the Biden administration. The RAC program was created by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. As we all know, the RACs are responsible for identifying Medicare overpayments and underpayments and for highlighting common billing errors, trends, and other Medicare payment issues. In addition to collecting overpayments, the data generated from RAC audits allows CMS to make changes to prevent improper payments in the future. The RACs are paid on a contingency fee basis and, therefore, only receive payment when recovery is made. This creates overzealous auditors and, many times, inaccurate findings. In 2010, the Obama administration directed federal agencies to increase the use of auditing programs such as the RACs to help protect the integrity of the Medicare program. The RAC program is relatively low cost and high value for CMS. It is likely that the health care industry will see growth in this area under the Biden administration. To that end, the expansion of audits will not only be RAC auditors, but will include increased oversight by MACs, CERTs, UPICs, etc.

Telehealth audits will be a focus for Pres. Biden. With increased use of telehealth due to COVID, comes increased telehealth fraud, allegedly. On September 30, 2020, the inter-agency National Health Care Take Down Initiative announced that it charged hundreds of defendants ostensibly responsible for—among other things—$4.5 billion in false and fraudulent claims relating to telehealth advertisements and services. Unfortunately for telehealth, bad actors are prevalent and will spur on more and more oversight.

Both government-initiated litigation and qui tam suits appear set for continued growth in 2021. Health care fraud and abuse dominated 2020 federal False Claims Act (“FCA”) recoveries, with almost 85 percent of FCA proceeds derived from HHS. The increase of health care enforcement payouts reflects how important government paid health insurance is in America. Becerra’s incoming team is, in any case, expected to generally ramp up law enforcement activities—both to punish health care fraud and abuse and as an exercise of HHS’s policy-making authorities.

With more than $1 billion of FCA payouts in 2020 derived from federal Anti-Kickback Statute (“AKS”) settlements alone, HHS’s heavy reliance on the FCA because it is a strong statute with “big teeth,” i.e., penalties are harsh. For these same reasons, prosecutors and qui tam relators will likely continue to focus their efforts on AKS enforcement in the Biden administration, despite the recent regulatory carveouts from the AKS and an emerging legal challenge from drug manufacturers.

The individual mandate is back in. The last administration got rid of the individual mandate when former Pres. Trump signed the GOP tax bill into law in 2017. Pres. Biden will bring back the penalty for not being covered under health insurance under his plan. Since the individual mandate currently is not federal law, a Biden campaign official said that he would use a combination of Executive Orders to undo the changes.

In an effort to lower the skyrocketing costs of prescription drugs, Pres. Biden’s plan would repeal existing law that currently bans Medicare from negotiating lower prices with drug manufacturers. He would also limit price increases for all brand, biotech and generic drugs and launch prices for drugs that do not have competition.

Consumers would also be able to buy cheaper priced prescription drugs from other countries, which could help mobilize competition. And Biden would terminate their advertising tax break in an effort to also help lower costs.

In all, the Biden administration is expected to expand health care, medical, oral, and telehealth, while simultaneously policing health care providers for aberrant billing practices. My advice for providers: Be cognizant of your billing practices. You have an opportunity with this administration to increase revenue from government-paid services but do so compliantly.

Premature Recoupment of Medicare Reimbursements Defies Due Process!

Who knows that – regardless your innocence –the government can and will recoup your funds preemptively at the third level of Medicare appeals. This flies in the face of the elements of due process. However, courts have ruled that the redetermination and the reconsideration levels afford the providers enough due process, which entails notice and an opportunity to be heard. I am here to tell you – that is horse manure. The first two levels of a Medicare appeal are hoops to jump through in order to get to an independent tribunal – the administrative law judge (“ALJ”). The odds of winning at the 1st or 2nd level Medicare appeal is next to zilch, although often you can get the alleged amount reduced. The first level is before the same entity that found you owe the money. Auditors are normally not keen on overturning themselves. The second level is little better. The first time that you present to an independent tribunal is at the third level.

Between 2009 and 2014, the number of ALJ appeals increased more than 1,200 percent. And the government recoups all alleged overpayments before you ever get before an ALJ.

In a recent case, Sahara Health Care, Inc. v. Azar, 975 F.3d 523 (5th Cir. 2020), a home health care provider brought an action against Secretary of Department of Health and Human Services (“HHS”) and Administrator for the Centers for Medicare and Medicaid Services (“CMS”), asserting that its statutory and due process rights were violated and that defendants acted ultra vires by recouping approximately $2.4 million in Medicare overpayments without providing a timely ALJ hearing. HHS moved to dismiss, and the provider moved to amend, for a temporary restraining order (“TRO”) and preliminary injunction, and for an expedited hearing.

The case was thrown out, concluding that adequate process had been provided and that defendants had not exceeded statutory authority, and denied provider’s motion for injunctive relief and to amend. The provider appealed and lost again.

What’s the law?

Congress prohibited HHS from recouping payments during the first two stages of administrative review. 42 U.S.C. § 1395ff(f)(2)(A).

If repayment of an overpayment would constitute an “extreme hardship, as determined by the Secretary,” the agency “shall enter into a plan with the provider” for repayment “over a period of at least 60 months but … not longer than 5 years.” 42 U.S.C. § 1395ddd(f)(1)(A). That hardship safety valve has some exceptions that work against insolvent providers. If “the Secretary has reason to believe that the provider of services or supplier may file for bankruptcy or otherwise cease to do business or discontinue participation” in the Medicare program, then the extended repayment plan is off the table. 42 U.S.C. § 1395ddd(f)(1)(C)(i). A provider that ultimately succeeds in overturning an overpayment determination receives the wrongfully recouped payments with interest. 42 U.S.C. § 1395ddd(f)(2)(B). The government’s interest rate is high. If you do have to pay back the alleged overpayment prematurely, the silver lining is that you may receive extra money for your troubles.

The years-long back log, however, may dwindle. The agency has received a funding increase, and currently expects to clear the backlog by 2022. In fact, the Secretary is under a Mandamus Order requiring such a timetable. 

A caveat regarding this grim news. This was in the Fifth Circuit. Other Courts disagree. The Fourth Circuit has held that providers do have property interests in Medicare reimbursements owed for services rendered, which is the correct holding. Of course, you have a property interest in your own money. An allegation of wrongdoing does not erase that property interest. The Fourth Circuit agrees with me.

HIPAA and Football

By Ashley Thomson, Partner at Practus, LLP. A Virtual Law Firm.

On rare occasions a Court can issue an opinion that is so logical and on-point you want to stand up and cheer.  Maybe you’re only cheering if you’re a HIPAA-nerd, like me. My name is Ashley and I work with Knicole. I was the assistant GC for Truman Medical Center for 17 years. As AGC at Truman, I was inundated with so many various issues.

Here’s what got me standing up in my home office as if Patrick Mahomes just threw a pass to Tyreek Hill and the KC Chiefs scored the winning touchdown in the Super Bowl—the 5th Circuit Court of Appeals held that a lost or stolen unencrypted device containing protected health information (“PHI”)[1] does not automatically result in a violation of the HIPAA Disclosure Rule or Encryption Rule. If you want to do your own touchdown dance check out Univ. of Texas M.D. Anderson Cancer Ctr. v. United States Dep’t of Health & Human Servs., No. 19-60226, 2021 WL 127819, at *5 (5th Cir. Jan. 14, 2021).

Unless you’ve spent the last 20 years living under a rock, you are generally aware that HIPAA is a law that protects your health information from public disclosure.  Most people don’t spell it correctly and even less people know what the acronym means.[2]  In 2009, HIPAA was supplemented with the HITECH Act.[3] Together, these laws govern how health care providers handle your medical information and what to do if there is a breach of the information.  HIPAA and HITECH’s implementing regulations (the “Regulations”) require all covered entities[4] “implement a mechanism to encrypt” all PHI that is stored electronically.  45 C.F.R. Section 164.312(a)(2)(iv).  Second, the Regulations prohibit unpermitted disclosure of PHI. 45 C.F.R. Sec. 164.502(a). These two regulations are referred to as the Encryption Rule and the Disclosure Rule respectively. These requirements are enforced by the Department of Health and Human Services (“HHS”) in conjunction with the Office for Civil Rights (“OCR”).

Whew, that was a quick history lesson.  Now, back to the story.

In 2012 and 2013 MD Anderson Cancer Center (“MD Anderson”) had three (3) events happen involving unencrypted devices containing PHI.  First, a laptop was stolen.  Second, a thumb drive was lost during someone’s commute home. Third, a visiting researcher misplaced a thumb drive. Pursuant to the regulations, MD Anderson reported these events to HHS.  

HHS concluded that MD Anderson violated the Regulations and imposed a fine over $4,000,000 (let me spell that out for you. . . FOUR MILLION DOLLARS). 

You may be wondering, what in the world did they violate that would result in such an outrageous fine?  So did MD Anderson!

MD Anderson threw its proverbial, red challenge flag and pursued its appeal rights and ended up, finally, in Federal Court where they succeeded on establishing that the mere loss of unencrypted PHI does not violate the Disclosure Rule and that the Encryption Rule does not require that a covered entity sit down and force each and every person to encrypt their devices.

Let’s look first at the Disclosure Rule. As a general rule, HIPAA prohibits the disclosure of PHI without permission from the patient.[5]  45 C.F.R. Sec. 164.502(a). HIPAA defines disclosure as “the release, transfer, provision of access to, or divulging in any manner of information outside the entity holding the information.” 45 C.F.R. Sec. 164.103. Prior to reaching the 5th Circuit, MD Anderson had been told the mere fact that the unencrypted laptop and thumb drives were lost or stolen resulted in the conclusion the PHI had been improperly disclosed to someone outside of the covered entity.  Thank goodness, the Court stepped in with the reasonable statement that many of us in the health care field have been saying for years. . . just because a device is lost or stolen doesn’t mean the PHI was improperly disclosed.[6]  “It defies reason to say an entity affirmatively acts to disclose information when someone steals it.” Univ. of Texas M.D. Anderson Cancer Ctr.,2021 WL 127819, at *5.

HHS claimed that it would be difficult for them to enforce the Disclosure Rule if it had to show that the PHI was disclosed to someone outside of the covered entity.  Well, go complain to the referees  HHS “that’s precisely the sort of policy argument that HHS could vet in a rulemaking proceeding. It’s not an acceptable basis for urging us to transmogrify the regulation HHS wrote into a broader one.” Id. And with that, the Court unceremoniously stated the obvious and provided some reason in the rather unreasonable world of HIPAA enforcement.

Next up? The Encryption Rule where HHS argued that MD Anderson’s desire to do more to encrypt their devices was an admission of non-compliance with the regulations.  Not so fast, said the Court.  The rule requires that a covered entity have a mechanism for the encryption PHI not that it implements an iron clad, hacker proof, 100% guaranteed encryption system.  MD Anderson had an encryption mechanism which is enough to satisfy the regulation, even if HHS now “wishes it had written a different” regulation.  Id.at *4.  

I feel like this is the SUPERBOWL of HIPAA decisions. You may not be as excited about this opinion as I was.  That’s ok. . . I’m a HIPAA and privacy nerd and I’m ok with that.  

Let’s hope I have many touchdowns to stand up and celebrate on Sunday!  Go Chiefs!    

The legal fine print: As exciting as this opinion is, please  remember that devices should be encrypted and PHI should be protected to the maximum extent possible.  While this is a great decision, it doesn’t remove the obligation to comply with the Regulations. 


[1] PHI contains 18 different identifiers.  42 C.F.R. § 164.514(a)(2)(i).

[2] It’s the Health Insurance Portability and Accountability Act of 1996. 

[3] HITECH stands for the Health Information Technology for Economic and Clinical Health Act of 2009. 

[4] Later, we can delve into what qualifies as a covered entity. Let’s just all agree that MD Anderson is a covered entity.

[5] This is a very simple overstatement, but it works for the purposes of this article.

[6] Let’s face it, most of these devices are lost or stolen and (1) never found or (2) thrown out as the thieves take what they really wanted . . . cold hard cash or credit cards.  An old janky laptop or a random thumb drive is not at the top of the most wanted list for kleptomaniacs.

Medicaid Suspension Lifted Because No Evidence of Intent!

Happy 2021! I bring great news and good tidings. I’m fairly sure that everyone reading is educated in what a preliminary injunction is and how important it can be for a health care provider falsely accused of credible allegations of fraud to lift the mandatory suspension of reimbursements. Finally, over the holidays, a Judge found that an indication of intent is required for an accusation of credible allegations of fraud, unlike past cases in which a mere accusation results in suspensions. 42 CFR §455.23 mandates that a health care provider’s reimbursements be suspended based on “credible allegations of fraud.” Which is a low bar. My client, an oral surgeon, had a disgruntled employee complaint and a baseless PCG audit of $6k. A double threat.

For those who are not in the know: An injunction is an extraordinary legal tool that allows the judge to suspend whatever bad action the government or one of its auditors do.

You have to prove:

  1. Likelihood of success on the merits
  2. Irreparable harm
  3. Balance of equities
  4. Public Interest.

I would guestimate that only 10-20% of requests for TROs and PIs are granted. Last week, we won for the oral surgeon. Everyone can learn from his success. This is how we won. Let me set the stage. We have an oral surgeon who underwent an infamous PCG audit resulting in an alleged $6k overpayment. PCG concurrently sends his data to program integrity, and one month later and without any notice, his reimbursements are suspended based on a “credible allegation of fraud.” Concurrently, he had a disgruntled employee threatening him.

Remember that the bar to demonstrate “credible allegation of fraud” is amazingly low. It is an “indicia of reliability.” An inaccurate PCG audit and a disgruntled employee, in this case, were the catalyst for the oral surgeon’s Medicaid reimbursements. His practice comprised of 80% Medicaid, so the suspension would cause irreparable harm to the practice.

We filed a TRO, PI, and Motion to Stay. The day before Christmas, we had trial.

The Judge ruled that the Department cannot just blindly rely on an anonymous accusation. There has to be some sort of investigation. It is not OK to accept accusations at face value without any sort of independent fact-checking. The Judge created an additional burden for the Department in cases of accusations of fraud that is not present in the regulation. But it is logical and reasonable to expect the Department to explore the accusations. The Judge emphasized that fraud requires intent. He also pointed out that fraud is not defined in the regulations. He emphasized that billing errors are not intentional acts.

The Judge held that, “[i]n light of the large number of Medicaid beneficiaries treated by the Petitioner’s practice, the rarity of the physician’s skills, and the apparent demand for those services, the relatively small amount of money now or formally in controversy, the lack of evidence of actual fraud and the contrary indications, the high probability that good cause exists for not suspending Petitioner’s Medicaid payments, and the near certainty of irreparable harm to the Petitioner if the relief is not granted, a TRO should be granted.”

Even better, the Judge ordered that the surgeon did not have to put up a bond, which is normally required by law. By the stroke of the Judge’s pen, the surgeon could go back to work performing medically necessary services to Medicaid recipients, which, by the way is rare for an oral surgeon to accept Medicaid. This is a success for health care providers. Accusations of fraud should require independent corroboration and evidence of intent.