Category Archives: Hospital Medicaid Providers

Inconsequential Medicare Audits Could Morph into a Whopper of a Whale

Emergency room physicians or health care providers are a discrete breed – whales in a sea of fish. Emergency room doctors have – for the most part – been overlooked by the RAC auditors or TPE, ZPIC, or MAC auditors. Maybe it’s because, even RAC auditors have children or spouses that need ER services from time to time. Maybe it’s because ER doctors use so many different billers. Normally, an ER doctor doesn’t know which of his or her patients are Medicaid or Medicare. When someone is suffering from a a broken leg or heart attack, the ER doctor is not going to stop care to inquire whether the patient is insured and by whom. But should they? Should ER doctors have to ask patients their insurer? If the answer includes any sort of explanation that care differs depending on whether someone is covered by Medicare or Medicaid or has private insurance, then, sadly, the answer may be yes.

ER doctors travel to separate emergency rooms, which are owned by various and distinct entities, and rely on individual billing companies. They do not normally work at only one hospital. Thus, they do not always have the same billers. We all know that not all billers are created equal. Some are endowed with a higher understanding of billing idiosyncrasies than others.

For example, for CPT codes 99281-99285 – Hospital emergency department services are not payable for the same calendar date as critical care services when provided by the same physician or physician group with the same specialty to the same patient. 

We all know that all hospitals do not hire and implement the same billing computer software programs. The old adage – “you get what you pay for” – may be more true than we think. Recent articles purport that “the move to electronic health records may be contributing to billions of dollars in higher costs for Medicare, private insurers and patients by making it easier for hospitals and physicians to bill more for their services, whether or not they provide additional care.” – Think a comment like that would red-flag ER doctors services by RAC, MAC and ZPIC auditors? The white whale may as well shoot a water spray 30 feet into the air.

Will auditing entities begin to watch ER billing more closely? And what are the consequences? When non-emergency health care providers are terminated by Medicare, Medicaid, or a MAC or MCO’s network, there is no emergency – by definition. Juxtapose, the need for ER health care providers. ER rooms cannot function with a shortage of  physicians and health care providers. Even more disturbing is if the termination is unwarranted and seemingly inconsequential – only affecting under 4 surgeries per month – but acts as the catalyst for termination of Medicare, Medicaid, and private payors across the board.

I have a client named Dr. Ishmael. His big fish became the MAC Palmetto – very suddenly. Like many ER docs, he rotates ERs. He provides services for Medicare, Medicaid, private pay, uninsured – it doesn’t matter to him, he is an ER doctor. He gets a letter from one MAC. In this case, it was Palmetto. Interestingly enough, Palmetto is his smallest insurance payor. Maybe 2 surgeries a month are covered by Palmetto. 90% of his services are provided to Medicaid patients. Not by his choice, but by demographics and circumstance. The letter from Palmetto states that he is being excluded from Palmetto’s Medicare network, effective in 10 days. He will also be placed on the CMS preclusion list in 4 months.

We appeal through Palmetto, as required. But, in the meantime, four other MACs, State Medicaid and BCBS terminate Dr. Ishmael’s billing privileges for Medicare and Medicaid based on Palmetto’s decision. Remember, we are appealing Palmetto’s decision as we believe it is erroneous. But because of Palmetto’s possibly incorrect decision to terminate Dr. Ishmael’s Medicare billing privileges, all of a sudden, 100% of Dr. Ishmael’s services are nonbillable and nonreimburseable…without Dr. Ishmael or the hospital ever getting the opportunity to review and defend against the otherwise innocuous termination decision.

Here, the hospital executives, along with legal counsel, schedule meetings with Dr. Ishmael. “They need him,” they say. “He is important,” they say. But he is not on the next month’s rotation. Or the next.

They say: “Come and see if ye can swerve me. Swerve me? ye cannot swerve me, else ye swerve yourselves! man has ye there. Swerve me?”

Billing audits on ER docs for Medicare/caid compliance are distinctive processes, separate from other providers’ audits. Most providers know the insurance of the patient to whom they are rendering services. Most providers use one biller and practice at one site. ER docs have no control over the choice of their billers. Not to mention, the questions arises, who gets to appeal on behalf the ER provider? Doesn’t the hospital reap the benefit of the reimbursements?

But one seemingly paltry, almost, minnow-like, audit by a cameo auditor can disrupt an entire career for an ER doc. It is imperative to act fast to appeal in the case of an ER doc.  But balance speed of the appeal with the importance of preparing all legal arguments. Most MACs or other auditing entities inform other payors quickly of your exclusion or termination but require you to put forth all arguments in your appeal or you could waive those defenses. I argue against that, but the allegations can exist nonetheless.

The moral of the story is ER docs need to appeal and appeal fast when billing privileges are restricted, even if the particular payor only constitutes 4 surgeries a month. As Herman Melville said: “I know not all that may be coming, but be it what it will, I’ll go to it laughing.” 

Sometimes, however, it is not a laughing matter. It is an appealable matter.

State Agencies Must Follow the State Medicare Plan! Or Else!

Accused of an alleged overpayment? Scrutinize the Department’s procedure to determine that alleged overpayment. One step out of line (in violation of any pertinent rule) by the Department and the overpayment is dismissed.

Ask yourself: Did the State follow Medicare State Plan Agreement? (The Plan germane in your State).

In a Mississippi Supreme Court case, the Mississippi Department of Medicaid (“DOM”) alleged that a hospital owed $1.2226 million in overpayments. However, the Court found that DOM failed to follow proper procedure in assessing the alleged overpayment. Since the DOM failed to follow the rules, the $1.2226 million alleged overpayment was thrown out.

The Court determined that the DOM, the single state agency charged with managing Medicare and Medicaid, must follow all pertinent rules otherwise an alleged overpayment will be thrown out.

Two cases premised on the notion that the DOM must follow all pertinent rules were decided in MS – with polar opposite endings.

  • Crossgates River Oaks Hosp. v. Mississippi Div. of Medicaid, 240 So. 3d 385, 388 (Miss. 2018); and
  • Cent. Mississippi Med. Ctr. v. Mississippi Div. of Medicaid, No. 2018-SA-01410-SCT, 2020 WL 728806, at *2–3 (Miss. Feb. 13, 2020).

In Crossgates, the hospitals prevailed because the DOM had failed to adhere to the Medicare State Plan Agreement. Applying the same legal principles in Cent. MS Med. Ctr, the DOM prevailed because the DOM adhered to the Medicaid State Plan.

It is as simple as the childhood game, “Simon Says.” Do what Simon (State Plan) says or you will be eliminated.

Crossgates

In the 2018 MS Supreme Court case, the Court found that the MS Department failed to follow the Medicare State Plan Agreement in determining an overpayment for a provider, which meant that the overpayment alleged was arbitrary. The thinking is as follows: had the Department followed the rules, then there may not be an overpayment or the alleged overpayment would be a different amount. Since the Department messed up procedurally, the provider got the whole alleged overpayment dismissed from Court. It is the “fruit of the poisonous tree” theory. See Crossgates River Oaks Hosp. v. Miss. Div. of Medicaid, 240 So. 3d 385 (Miss. 2018).

While Courts generally afford great deference to an agency’s interpretation of its regulations, once the agency violates a procedural rule, it is not entitled to that deference. The Court found that the DOM’s interpretation of Attachment 4.19–B of the State Plan was inconsistent with the relevant regulation. Crossgates River Oaks Hosp. v. Mississippi Div. of Medicaid, 240 So. 3d 385, 388 (Miss. 2018).

Throughout these proceedings, the DOM never articulated an explanation for its failure to exclude the radiology and laboratory charges or for its use of a blended rate in place of actual costs, absent altering or amending the State Plan. The clear language of the State Plan establishes that DOM’s choice to reduce payments to the Hospitals was arbitrary, capricious, and not supported by substantial evidence.

Central MS Medical Center

Juxtapose the Central Mississippi Medical Center case, which, by the way has not been released for publication. Atop the header for the case is the following warning:

“NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION IN THE PERMANENT LAW REPORTS. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.”

With that caveat, the MS Supreme Court held that Medicaid State Plans that are accepted by CMS reign supreme and must be followed. In this case, the MS State Plan required the DOM to use the Medicare Notice of Program Reimbursement (NPR) to establish the final reimbursement.

According to the Supreme Court, the agency followed the rules. Thus, the agency’s adverse determination was upheld. It does not matter what the adverse determination was – you can insert any adverse determination into the equation. But the equation remains stedfast. The State must follow the State Plan in order to validate any adverse decision.

Inconsequential Medicare Audits Could Morph into a Whopper of a Whale

Emergency room physicians or health care providers are a discrete breed – whales in a sea of fish. Emergency room doctors have – for the most part – been overlooked by the RAC auditors or TPE, ZPIC, or MAC auditors. Maybe it’s because, even RAC auditors have children or spouses that need ER services from time to time. Maybe it’s because ER doctors use so many different billers. Normally, an ER doctor doesn’t know which of his or her patients are Medicaid or Medicare. When someone is suffering from a a broken leg or heart attack, the ER doctor is not going to stop care to inquire whether the patient is insured and by whom. But should they? Should ER doctors have to ask patients their insurer? If the answer includes any sort of explanation that care differs depending on whether someone is covered by Medicare or Medicaid or has private insurance, then, sadly, the answer may be yes.

ER doctors travel to separate emergency rooms, which are owned by various and distinct entities, and rely on individual billing companies. They do not normally work at only one hospital. Thus, they do not always have the same billers. We all know that not all billers are created equal. Some are endowed with a higher understanding of billing idiosyncrasies than others.

For example, for CPT codes 99281-99285 – Hospital emergency department services are not payable for the same calendar date as critical care services when provided by the same physician or physician group with the same specialty to the same patient. 

We all know that all hospitals do not hire and implement the same billing computer software programs. The old adage – “you get what you pay for” – may be more true than we think. Recent articles purport that “the move to electronic health records may be contributing to billions of dollars in higher costs for Medicare, private insurers and patients by making it easier for hospitals and physicians to bill more for their services, whether or not they provide additional care.” – Think a comment like that would red-flag ER doctors services by RAC, MAC and ZPIC auditors? The white whale may as well shoot a water spray 30 feet into the air.

Will auditing entities begin to watch ER billing more closely? And what are the consequences? When non-emergency health care providers are terminated by Medicare, Medicaid, or a MAC or MCO’s network, there is no emergency – by definition. Juxtapose, the need for ER health care providers. ER rooms cannot function with a shortage of  physicians and health care providers. Even more disturbing is if the termination is unwarranted and seemingly inconsequential – only affecting under 4 surgeries per month – but acts as the catalyst for termination of Medicare, Medicaid, and private payors across the board.

I have a client named Dr. Ishmael. His big fish became the MAC Palmetto – very suddenly. Like many ER docs, he rotates ERs. He provides services for Medicare, Medicaid, private pay, uninsured – it doesn’t matter to him, he is an ER doctor. He gets a letter from one MAC. In this case, it was Palmetto. Interestingly enough, Palmetto is his smallest insurance payor. Maybe 2 surgeries a month are covered by Palmetto. 90% of his services are provided to Medicaid patients. Not by his choice, but by demographics and circumstance. The letter from Palmetto states that he is being excluded from Palmetto’s Medicare network, effective in 10 days. He will also be placed on the CMS preclusion list in 4 months.

We appeal through Palmetto, as required. But, in the meantime, four other MACs, State Medicaid and BCBS terminate Dr. Ishmael’s billing privileges for Medicare and Medicaid based on Palmetto’s decision. Remember, we are appealing Palmetto’s decision as we believe it is erroneous. But because of Palmetto’s possibly incorrect decision to terminate Dr. Ishmael’s Medicare billing privileges, all of a sudden, 100% of Dr. Ishmael’s services are nonbillable and nonreimburseable…without Dr. Ishmael or the hospital ever getting the opportunity to review and defend against the otherwise innocuous termination decision.

Here, the hospital executives, along with legal counsel, schedule meetings with Dr. Ishmael. “They need him,” they say. “He is important,” they say. But he is not on the next month’s rotation. Or the next.

They say: “Come and see if ye can swerve me. Swerve me? ye cannot swerve me, else ye swerve yourselves! man has ye there. Swerve me?”

Billing audits on ER docs for Medicare/caid compliance are distinctive processes, separate from other providers’ audits. Most providers know the insurance of the patient to whom they are rendering services. Most providers use one biller and practice at one site. ER docs have no control over the choice of their billers. Not to mention, the questions arises, who gets to appeal on behalf the ER provider? Doesn’t the hospital reap the benefit of the reimbursements?

But one seemingly paltry, almost, minnow-like, audit by a cameo auditor can disrupt an entire career for an ER doc. It is imperative to act fast to appeal in the case of an ER doc.  But balance speed of the appeal with the importance of preparing all legal arguments. Most MACs or other auditing entities inform other payors quickly of your exclusion or termination but require you to put forth all arguments in your appeal or you could waive those defenses. I argue against that, but the allegations can exist nonetheless.

The moral of the story is ER docs need to appeal and appeal fast when billing privileges are restricted, even if the particular payor only constitutes 4 surgeries a month. As Herman Melville said: “I know not all that may be coming, but be it what it will, I’ll go to it laughing.” 

Sometimes, however, it is not a laughing matter. It is an appealable matter.

Medicare “Site Neutral” Reimbursements Hit Hospitals Hard, But Is It Legal?

Shockingly, not all new rules that emerge from the Center for Medicare and Medicaid Services (CMS) are actually compliant with the law. Wait! What? How can CMS publish Final Rules that are not compliant with the law?

This was an eye-opening discovery as a “baby lawyer” back 20 years ago. The government can and does publish and create Rules that, sometimes, exceed its legal authority. Of course, the Agency must follow appropriate rule-making procedure and allow for a comment period (etc.), but CMS does not have to listen to the comments. Theoretically, CMS could publish a Final Rule mandating that all Medicare providers provide 50 hours of free services a year or that the reimbursement rate for all services is $1. Both of my examples violate multiple rules, regulations, and laws, but until an aggrieved party with standing files a lawsuit declaring the Final Rule to be invalid or Congress passes a law that renders the Rule moot, the Rule exists and can be enforced by CMS and its agents.

The Rule-change (the “Site-Neutrality Rule”), which became effective January 1, 2019, reduced Medicare reimbursements to hospitals with outpatient facilities. Medicare will pay hospitals that have outpatient facilities “off campus” at a lower rate — equivalent to what it pays independent physicians for clinic visits. This decrease in Medicare reimbursements hits hard for most hospitals across the country, but, especially, rural hospitals. For the past 10+ years, hospitals have built outpatient facilities to serve more patients, and been reimbursed a higher Medicare reimbursement rate than independent physicians because the services at the hospital’s outpatient facility were connected to an outpatient facility affiliated with a hospital. Now the Site-Neutrality Rule leaves many hospitals trying to catch their breaths after the metaphoric punch to the belly. On the other hand, independent physicians claim that they have been providing the exact, same services as the hospital-affiliated outpatient facilities for years, but have received a lower reimbursement rate. I have no opinion (I do, but my opinion is not the topic in this blog) as to whether physicians and hospitals should be reimbursed equally – this blog is not pro-physician or pro-hospital. Rather, this blog is “pro-holding CMS liable to render Rules that follow the law.” Whether the hospitals or the physicians were receiving a cut in reimbursement rates, I am in favor of the those cuts (and future cuts) abiding by the law. Interestingly, should the AHA win this case, it could set solid, helpful, legal precedent for all types of providers and all types of decreased Medicare/caid reimbursements going forward.

Because of the Site-Neutrality Rule, in 2019, hospitals’ reimbursements will drop approximately $380 million and $760 million in 2020, according to CMS.

Before CMS brags on a decrease in the Medicare budget due to a proposed or Final Rule, it should remember that there is budget neutrality requirement when it comes to Rules implemented by CMS. 42 US.C. § 1395l. Yet, here, for the Site-Neutrality Rule, according to articles and journals, CMS is boasting its Site-Neutrality Rule as saving millions upon millions of dollars for Medicare. Can we say “Budget Non-Neutrality?”

The American Hospital Association filed a lawsuit December 2018 claiming that CMS exceeded its authority by implementing the Final Rule for “site neutral” Medicare reimbursements for hospitals with outpatient facilities. The lawsuit requests an injunction to stop the decrease and an order to repay any funds withheld thus far.

The claim, which, I believe has merit, argues that the Site-Neutrality Rule exceeds CMS’s statutory authority under the Medicare Act because of the budget neutrality mandate, in part – there are other arguments, but, for the sake of this blog, I am concentrating on the budget neutrality requirement. In my humble opinion, the budget neutrality requirement is overlooked by many attorneys and providers when it comes to challenging cuts to Medicare or Medicaid reimbursement rates.

On March 22, 2019, CMS filed a Motion to Dismiss or in the alternative, a Cross Motion for Summary Judgment. On April 5, 2019, AHA (and the rest of the Plaintiffs) responded in opposition. On April 19, 2019, CMS responded to AHA’s response in opposition. The Judge has not ruled on the Motions, as of today, April 25, 2019.

Obviously, I will be keeping a close eye on the progress of this case going forward. In the meantime, more reductions in reimbursement rates are on the horizon…

Recently, CMS recently proposed three new rules that would further update the Medicare payment rates and quality reporting programs for hospices, skilled nursing facilities (SNFs), and inpatient psychiatric facilities.

Stay tuned.

Recent Case Law May Change the Relationship Between Hospitals and Physicians Forever!

No, this is not a Shakespearean blog post. The Hamlet in this case is not the Prince of Denmark; it is a hospital system who hired a doctor, Dr. Hernandez as an independent contractor and whose private practice flopped. When the hospital at which he had privileges refused to hire him as an employee, Hernandez sued Hamlet under the False Claims Act (FCA) and Unfair Trade Practices- AND WON!!

Relationships between hospitals and physicians may forever be changed.

In an October 2018 decision, Hamlet H.M.A., LLC V. Hernandez, the NC Court of Appeals ruled that a hospital can be liable to a physician for Unfair and Deceptive Trade Practices (UDTP) – causing a new level of care to be needed in negotiations between hospitals and physicians.

Dr. Hernandez accepted a position with Sandhills Regional Medical Center. The original offer was for Dr. Hernandez to set up his own independent practice and to be an independent contractor for the hospital. The offer guaranteed a minimum collection amount for the first 18 months of the 36-month contract. The base salary was $325,000, with a bonus based on worked RVUs. Dr. Hernandez countered and asked to be considered as an employee instead of as an independent contractor. Sandhills sent an email offering a base salary of $275,000 as an employee. As any reasonable, logical person would do, Dr. Hernandez responded with an email stating that it would be irrational to accept a base salary so much lower in order to obtain employee status. The hospital offered an “employee status option” at the end of 18 months.

Dr. Hernandez then sent Sandhills an email asking to extend the time period of guaranteed income to 24 months, rather than 18 months. Plaintiff replied that it could not extend the period of guaranteed income, but raised the monthly salary from $47,616.82 to $49,500.00 and also added a signing bonus of $30,000.00. After further negotiations, the parties entered into a Physician Recruitment Agreement on March 9, 2011.

Dr. Hernandez’s private practice flopped, and at the end of the first 18-month period, he requested to exercise the employment option in his contract and to become an employee of Sandhills. But Sandhills did not give Dr. Hernandez an employment contract.

On August 29, 2014, Sandhills filed a complaint against Dr. Hernandez alleging breach of contract and demanding repayment of the entire amount paid to Dr. Hernandez, a total of 21 payments amounting to $902,259.66. Dr. Hernandez filed an answer with counterclaims for breach of contract, fraud, unfair or deceptive trade practices, and unjust enrichment. A jury trial was held in Superior Court in Richmond County at the end of August and the beginning of September 2016. The jury returned a verdict for Sandhills for $334,341.14 (a random number).

Dr. Hernandez countered sued the hospital for Unfair and Deceptive Trade Practices (UDTP) alleging that the hospital fraudulently induced him to enter into the contract with the hospital as an independent contractor. His allegations that the hospital violated UDTP because the hospital offered a lower salary to be considered an employee was shocking and unprecedented. Most likely, Sandhills never even contemplated that it could be held liable under UDTP because of a disparity in salary offered to Dr. Hernandez depending on his employment status. Most likely, the man or woman who sent the email to Dr. Hernandez with the disparate salaries never asked its general counsel whether the action could penalize the hospital. Who would have thought to?

One exception to UDTP is the “learned profession” exception. Basically, the courts have held that if the two parties to an agreement are learned professionals and the topic of the contract has to do with the parties’ speciality; i.e, medicine, in this case, then the parties cannot allege UDTP because both parties were knowledgeable. The issue of first impression presented by Hamlet is whether the “learned profession” exception set forth in N.C. Gen. Stat. § 75-1.1(b) applies to a dispute between a physician and a hospital relating to alleged false claims made by the hospital to induce the physician to enter into an employment contract. If the learned profession exception were to apply, then Dr. Hernandez’s UDTP claim against Sandhill would be dismissed.

Dr. Hernandez alleged that the hospital made false representations to induce him to enter into a contract. The Court held that the fact that he is a physician does not change the nature of the negotiation of a business contract. The Court found that the “learned profession” exception does not apply to any negotiation just because the two parties are physicians. For example, if a physician and a hospital were to contract to buy a beach house, then the exception would not apply because the nature of the contract (were something go awry and cause an UDTP lawsuit) because buying a beach house has nothing to do with being a physician or hospital. Similarly, here, the Court held that an employment contract had nothing to do with rendering medicine. Therefore, the exception did not apply. The Court of Appeals reversed the trial court’s directed verdict against Dr. Hernandez.

This decision definitely creates more tension between hospitals and physicians. Now, in negotiations with employees and independent contractors, hospitals need to be mindful that UDTP claims can be alleged against them. This case is recent precedent for an unfamiliar modern world of health care negotiations.

Detroit Hospitals and Funeral Home Under Fire by Medicare and Police

What in the health care is going on in Detroit??

Hospitals in Detroit, MI may lose Medicare funding, which would be financially devastating to the hospitals. Is hospital care in Detroit at risk of going defunct? Sometimes, I think, we lose sight of how important our local hospitals are to our communities.

The Center for Medicare and Medicaid Services (CMS) notified DMC Harper University Hospital and Detroit Receiving Hospital that they may lose Medicare funding because they are allegedly not in compliance with “physical environment regulations.”

42 C.F.R. § 483.90 “Physical environment” states “The facility must be designed, constructed, equipped, and maintained to protect the health and safety of residents, personnel and the public.”

CMS will give the hospitals time to submit corrective action plan, but if the plans of correction are not accepted by CMS, Medicare will terminate the hospitals’ participation by April 15, 2019 (tax day – a bad omen?).

The two hospitals failed fire safety and infection control. Section 483.90 instructs providers to ensure fire safety by installing appropriate and required alarm systems. Providers are forbidden to have certain flammable goods in the hallways. It requires sprinkler systems to be installed. It requires emergency generators to be installed on the premises. Could you imagine the liability if Hurricane ABC destroys the area and Provider XYZ loses power, which causes Grandma Moses to stop breathing because her oxygen tube no longer disseminate oxygen? Think of the artwork we would have lost! Ok, that was a bad example because there are no hurricanes in Detroit.

Another important criterion of the physical environment regulations is infection control, which, according to the letters from CMS, is the criterion that the two hospitals allegedly have failed. Each hospital underwent a survey on Oct. 18th when the alleged deficiencies were discovered.

“We have determined that the deficiencies are significant and limit your hospital’s capacity to render adequate care and ensure the health and safety of your patients,” stated the Jan. 15 letters to the hospitals from CMS. CMS informed the hospitals they had until Jan. 25 to submit a plan of correction. It is unclear whether the hospitals submitted these plans. Hopefully, both hospitals have a legal team that did draft and submit the plans of correction.

Michigan is a state in which if Medicare funds are terminated, then Michigan will terminate Medicaid funds automatically. So termination of Medicare funding can be catastrophic. Concurrently, Scott Steiner, chief of Detroit Receiving Hospital, is resigning (shocker).

Detroit must have something in the water when it comes to health care issues in the news because, also in Detroit, a police task force Monday removed 26 fetuses from a Detroit Medical Center (DMC) morgue, all of which were allegedly mishandled by Perry Funeral Home. Twenty of the bodies taken from the DMC cooler had dates-of-birth listed from 1998 and earlier, with six dating to the 1970s. The earliest date of birth of a discovered fetus was Aug. 11, 1971.

State authorities are looking into another case of dozens of infant remains allegedly hidden for years in a DMC hospital. News articles do not mention the DMC hospital’s name, but one cannot help but wonder whether the two incidents – (1) Detroit hospitals failing infection control specifications; and (2) decomposing bodies found in a hospital – are intertwined.

Detroit has to be winning a record here with health care issues – Medicare audit failures in hospitals, possible loss of Medicare contracts, possible suspension of Medicaid reimbursements, and, apparently decomposing fetuses in funeral homes and hospitals.

Hospital Association Joins Lawsuit to Enjoin “Psychiatric Boarding”

New Hampshire hospitals have joined the American Civil Liberties Union (ACLU) in a lawsuit against the State of New Hampshire over the boarding of mental health patients in hospital emergency rooms.

In November 2018, the ACLU filed a class action lawsuit in NH federal court asking the court to order the cease of the practice of “psychiatric boarding,” in which mental health patients are held sometimes against their will and without due process in hospital emergency rooms throughout New Hampshire as they await admission to the state psychiatric hospital, often for weeks at a time. This is not only a New Hampshire problem. This is a problem in every state. The hospitals want the practice abolished because, in most cases of severe mental illness, the patient is unemployed and uninsured. There are not enough psychiatric beds to hold the amount of mentally ill consumers.

Many psychiatric patients rely on Medicaid, but due to the Institution for Mental Disease (IMD) exclusion, Medicaid does not cover the cost of care for patients 21 to 64 years of age (when Medicare kicks in) at inpatient psychiatric or addiction treatment facilities with a capacity greater than 16 beds. This rule makes it difficult for states to fund larger inpatient psychiatric hospitals, which further exacerbates the psychiatric boarding crisis.

The emergency rooms (ER) have become the safety net for mental health. The two most common diagnoses at an ER is alcohol abuse and suicidal tendencies. There has been a sharp increase in ER visits for the people suffering from mental health issues in the recent years. Are we as a population growing more depressed?

It is very frustrating to be in a hospital without the allowance to leave. But that is what psychiatric boarding is – patients present to an ER in crisis and because there is no bed for them at a psychiatric hospital, the patient is held at the hospital against their will until a bed opens up. No psychiatric care is rendered at the ER. It is just a waiting game, which is not fun for the people enduring it.

I recently encountered a glimpse into how it feels to be stuck at a hospital without the ability to leave. On a personal level, although not dealing with mental health but with hospitals in general, I recently broke my leg. I underwent surgery and received 6 screws and a plate in my leg. Around Christmas I became extremely ill from an infection in my leg. After I passed out at my home due to an allergic reaction to my medication which caused an epileptic seizure, my husband called EMS and I was transported to the hospital. Because it was the day after Christmas, the staff was light. I was transported to a hospital that had no orthopedic surgeon on call. (Akin to a mental health patient presenting at an ER – there are no psychiatric residents at most hospitals). Because no orthopedic surgeon was on call, I was transported to a larger hospital and underwent emergency surgery for the infection. I stayed at the hospital for 5 of the longest days of my life. Not because I still needed medical treatment, but because the orthopedic surgeon had taken off for vacation between Christmas and New Year’s. Without the orthopedic’s authorization that I could leave the hospital I was stuck there unless I left against medical advice. Finally, at what seemed to be at his leisurely time, the orthopedic surgeon came back to work the afternoon of January 1, 2019, and I was able to leave the hospital… but not without a few choice words from yours truly. I can tell you without any reservation that I was not a stellar patient those last couple days when I felt well enough to leave but there was no doctor present to allow it.

I imagine how I felt those last couple days in the hospital is how mentally ill patients feel while they are being held until a bed at a psychiatric unit opens up. It must be so frustrating. It certainly cannot be ameliorating any presenting mental health condition. In my case, I had no mental health issues but once I felt like I was being held against my will, mental health issues started to arise from my anger.

A shortage of psychiatric inpatient beds is a key contributing factor to overcrowded ERs across the nation. Between 1970 and 2006, state and county psychiatric inpatient facilities in the country cut capacity from about 400,000 beds to fewer than 50,000.

A study conducted by Wake Forest University found that ER stays for mental health issues are approximately 3.2 times longer stays than for physical reasons.

ER visits rose by nearly 15% between 2006 and 2014, according to the Healthcare Cost and Utilization Project. Over the same time period, ER visits associated with mental health and substance abuse shot up by nearly 44%.

Hopefully if the NH Hospital Association is successful in its lawsuit, other states will follow suit and file a lawsuit. I am not sure where the mentally ill will go if they do not remain at the ER. Perhaps this lawsuit and others that follow will force states to change the current Medicaid laws that do not allow mental health coverage for those over 21 years old. With the mental health and physical health Americans with Disabilities’ parity laws, I do not know why someone hasn’t challenged the constitutionality of the IMD exclusion.

AHA Obtains a Permanent Injunction against HHS!!! Raises the Price of Drugs!

Obtaining injunctions against the government is the best part of my job. I love it. I thrive on it. Whenever there is a reduction in Medicare/caid reimbursements rates, I secretly hope someone hires me to get an injunction to increase the reimbursement rates. But injunctions are expensive. So I am always happy whenever a provider obtains an injunction against the government, even if I were not hired to obtain it.

On December 27, 2018, Judge Rudolph Contreras, United States District Judge, ordered the Department of Health and Human Services (“HHS”) to increase the Medicare reimbursements rates for outpatient drugs under the 340B Drug Program. A permanent injunction!!!

In November 2017, HHS reduced the Medicare reimbursement rates for outpatient drugs acquired through the 340B Program from average sales price (“ASP”) plus 6% to ASP minus 22.5%. Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs, 82 Fed. Reg. 33,558, 33,634 (Jul. 20, 2017) (codified at 42 C.F.R. pt. 419).

HHS reduced Medicare reimbursements worth billions of dollars to private institutions. HHS has the authority to set Medicare reimbursement rates. But one should question a 30% reduction. Drug prices haven’t dropped.

Plaintiff – the American Hospital Association (AHA) – sued HHS when HHS cut outpatient pharmaceuticals by 30%. HHS contends that the rate adjustment was statutorily authorized and necessary to close the gap between the discounted rates at which Plaintiffs obtain the drugs at issue—through Medicare’s “340B Program”—and the higher rates at which Plaintiffs were previously reimbursed for those drugs under a different Medicare framework.

AHA asked the Court to vacate the HHS’ rate reduction, require HHS to apply previous reimbursement rates for the remainder of this year, and require HHS to pay Plaintiffs the difference between the reimbursements they have received this year under the new rates and the reimbursements they would have received under the previous rates.

HHS argued that AHA failed to exhaust its administrative remedies. See blog.

What is the 340B Drug Program?

In 1992, Congress established what is now commonly referred to as the “340B Program.” Veterans Health Care Act of 1992, Pub L. No. 102-585, § 602, 106 Stat. 4943, 4967–71. The 340B Program allows participating hospitals and other health care providers (“covered entities”) to purchase certain “covered outpatient drugs” from manufacturers at or below the drugs’ “maximum” or “ceiling” prices, which are dictated by a statutory formula and are typically significantly discounted from those drugs’ average manufacturer prices. See 42 U.S.C. § 256b(a)(1)–(2).3 Put more simply, this Program “imposes ceilings on prices drug manufacturers may charge for medications sold to specified health care facilities.” Astra USA, Inc. v. Santa Clara Cty., 563 U.S. 110, 113 (2011). It is intended to enable covered entities “to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” H.R. Rep. No. 102-384(II), at 12 (1992); see also Medicare Program: Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs (“2018 OPPS Rule”), 82 Fed. Reg. 52,356, 52,493 & 52,493 n.18 (Nov. 13, 2017) (codified at 42 C.F.R. pt. 419). Importantly, and as discussed in greater detail below, the 340B Program allows covered entities to purchase certain drugs at steeply discounted rates, and then seek reimbursement for those purchases under Medicare Part B at the rates established by OPPS.

HHS provided a detailed explanation of why it believed this rate reduction was necessary. First, HHS noted that several recent studies have confirmed the large “profit” margin created by the difference between the price that hospitals pay to acquire 340B drugs and the price at which Medicare reimburses those drugs. Second, HHS stated that because of this “profit” margin, HHS was “concerned that the current payment methodology may lead to unnecessary utilization and potential over-utilization of separately payable drugs.” It cited, as an example of this phenomenon, a 2015 Government Accountability Office Report finding that Medicare Part B drug spending was substantially higher at 340B hospitals than at non-340B hospitals. The data indicated that “on average, beneficiaries at 340B . . . hospitals were either prescribed more drugs or more expensive drugs than beneficiaries at the other non-340B hospitals in GAO’s analysis.” Id. at 33,633. Third, HHS expressed concern “about the rising prices of certain drugs and that Medicare beneficiaries, including low-income seniors, are responsible for paying 20 % of the Medicare payment rate for these drugs,” rather than the lower 340B rate paid by the covered hospitals.

The Court found that Plaintiff – AHA – did not need to exhaust its administrative remedies because there was no administrative remedy to exhaust. HHS had ruled that 340B drugs were to be recompensed at 30% lower rates. There is no appeal route for a rule made. There is no reconsideration review of a rule made. Therefore, the Court found that exhaustion of administrative remedies would be futile because no administrative remedies existed.

But the most important finding the Court made was that the 30% reduction in Medicare reimbursement rates for 340B drugs was arbitrary, capricious and outside the Secretary’s legal scope. The Court made the brash decision to determine the reimbursement rate for 340B drugs was arbitrary, but could not decide a remedy.

A remedy for an erroneous rule is to strike the rule and have the government repay the 340B drug reimbursements at the amount that should have been paid. But the Court does not order this. Instead the Court asks for each side to brief what remedy they think should be used. They have 30 days to brief their side.

Another NCTracks Debacle? Enter NC HealthConnex – A Whole New Computer System To Potentially Screw Up

North Carolina is mandating that health care providers link with all other health care providers. HIPAA be damned! Just another hoop to jump through in order to get paid by Medicaid – as if it isn’t hard enough!

If you do not comply and link your health care practice to NC HealthConnex by June 1, 2019, you could lose your Medicaid contract.

“As North Carolina moves into data-driven, value-based health care, the NC HIEA is working to modernize the state-designated health information exchange, now called NC HealthConnex.” About NC HealthConnex website.

NC HIEA = NC Health Information Exchange Authority (NC HIEA) and created by N.C. Gen. Stat. § 90-414.7. “North Carolina Health Information Exchange Authority.”

North Carolina state law mandates that all health care providers who receive any State funds, which would include Medicaid, HealthChoice and the State Health Plan, must connect and submit patient demographic and clinical data to NC HealthConnex by June 1, 2019. The process could take 12 to 18 months. So you better get going. Move it or lose it, literally. If you do not comply, you can lose your license to participate in state-funded programs, including Medicaid.

If you go to the NC Health Information Exchange Authority (NC HIEA) website article, entitled, “NC HealthConnex Participant Base Continues to Grow,” you will see the following:

Screen Shot 2018-11-29 at 3.21.53 PM

I highlighted the Session Law that, according to the above, requires that health care providers who receive state funds must connect to NC HealthConnex. See above. However, when you actually read Session Law 2017-57, it is untrue that Session Law 2017-57 mandates that health care providers who receive state funds must connect to NC HealthConnex.

If you follow the citation by NC HIEA (above), you will see that buried in Session Law 2017-57, the 2017 Appropriations Bill, is a clause that states:

“SECTION 11A.8.(e)  Of the funds appropriated in this act to the Department of Health and Human Services, Division of Central Management and Support, Office of Rural Health, for the Community Health Grant Program, the sum of up to one hundred fifty thousand dollars ($150,000) in recurring funds for each fiscal year of the 2017‑2019 fiscal biennium shall be used to match federal funds to provide to safety net providers eligible to participate in the Community Health Grant Program, through the Rural Health Technology Team, ongoing training and technical assistance with respect to health information technology, the adoption of electronic health records, and the establishment of connectivity to the State’s health information exchange network known as NC HealthConnex.”

As you can plainly read, this clause only allots funds to provide training and assistance to providers eligible to participate in the Community Health Grant Program. The above clause certainly does not mandate that Healthcare providers who receive state funds connect to NC HealthConnex.

Session Law 2017-57, only mandates $150,000 for training and assistance for HealthConnex.

So what is the legal statute that mandates health care providers who receive state funds must connect to NC HealthConnex?

Ok, bear with me. Here’s where it gets complex.

A law was passed in 2015, which created the North Carolina Health Information Exchange Authority (NC HIEA). NC HIEA is a sub agency of the North Carolina Department of Information Technology (NC DIT) Government Data Analytic Center. NC HIEA operates the NC HealthConnex. The State CIO maintains the responsibility if the NC HealthConnex.

Supposedly, that 2015 law mandates that health care providers who receive state funds must connect to NC HealthConnex…

I read it. You can click on the link here. This subsection is the only section that I would deem apropos to health care providers accepting State funding:

“In consultation with the Advisory Board, develop a strategic plan for achieving statewide participation in the HIE Network by all hospitals and health care providers licensed in this State.”

What part of the above clause states that health care providers are MANDATED to participate? So, please, if any of my readers actually know which law mandates provider participation, please forward to me. Because my question is – Is participation REALLY mandated? Will providers seriously lose their reimbursement rights for services rendered for failing to participate in NC HealthConnex?? Because I see multiple violations of federal law with this requirement, including HIPAA and due process.

HealthConnex can link your practice to it if you use the following EHR programs:

  • Ace Health Solutions
  • Allscripts
  • Amazing Charts/Harris Healthcare Company
  • Aprima
  • Athena Health
  • AYM Technologies
  • Casehandler
  • Centricity
  • Cerner
  • CureMD
  • DAS Health/Aprima
  • eClinicalWorks
  • eMD
  • eMed Solutions, LLC
  • EPIC
  • Evident- Thrive
  • Greenway
  • ICANotes Behavioral Health EHR
  • ICAN Solutions, Inc
  • Integrity/Checkpoint
  • Kaleidacare
  • Lauris Online
  • McKesson Practice Partners
  • Medical Transcription Billing Corporation
  • Medinformatix
  • Meditab Software, Inc.
  • Meditech
  • Mediware-Alphaflex
  • MTBC
  • MicroMD
  • Netsmart
  • NextGen
  • Office Ally
  • Office Practicum
  • Oncelogix Sharenote
  • Patagonia Health
  • Physician’s Computer Company (PCC)
  • PIMSY
  • Practice Fusion Cloud
  • Praxis
  • PrognoCIS
  • PsyTech Solutions, Inc.
  • Qualifacts – Carelogic
  • Radysans
  • Reli Med Solutions
  • SET-Works
  • SRS
  • The Echo Group
  • Therap
  • Trimed Tech
  • Valant
  • Waiting Room Solutions

The law also requires:

  • Hospitals as defined by G.S. 131E-176(13), physicians licensed to practice under Article 1 of Chapter 90 of the General Statutes, physician assistants as defined in 21 NCAC 32S .0201, and nurse practitioners as defined in 21 NCAC 36 .0801 who provide Medicaid services and who have an electronic health record system shall connect by June 1, 2018.
  • All other providers of Medicaid and state-funded services shall connect by June 1, 2019. See changes in 2018 Session Law below.
  • Prepaid Health Plans (PHPs), as defined in S.L. 2015-245, will be required to connect to the HIE per their contracts with the NC Division of Health Benefits (DHB). Clarifies that PHPs are required to submit encounter and claims data by the commencement of the contract with NC DHB.
  • Clarifies that Local Management Entities/Managed Care Organizations (LMEs/MCOs) are required to submit encounter and claims data by June 1, 2020.

New from the 2018 Legislative Short Session, NCSL 2018-41: 

  • Dentists and ambulatory surgical centers are required to submit clinical and demographic data by June 1, 2021.
  • Pharmacies are required to submit claims data pertaining to State services once per day by June 1, 2021, using pharmacy industry standardized formats.

To meet the state’s mandate, a Medicaid provider is “connected” when its clinical and demographic information pertaining to services paid for by Medicaid and other State-funded health care funds are being sent to NC HealthConnex, at least twice daily—either through a direct connection or via a hub (i.e., a larger system with which it participates, another regional HIE with which it participates or an EHR vendor). Participation agreements signed with the designated entity would need to list all affiliate connections.

Let’s just wait and see how this computer system turns out. Hopefully we don’t have a second rendition of NCTracks. We all know how well that turned out. See blog and blog.

Medicaid participation continues to get more and more complicated. Remember the day when you could write a service note with a pen? That was so much cheaper than investing in computers and software. When did it get so expensive to provide health care to the most needy?

Non-Profit Going For-Profit: Merger Mania Manifests

According to the American Hospital Association, America has 4,840 general hospitals that aren’t run by the federal government: 2,849 are nonprofit, 1,035 are for-profit and 956 are owned by state or local governments.

What is the distinction between a for-profit and not-for-profit hospital… besides the obvious? The obvious difference is that one is “for-profit” and one is “not-for-profit” – but any reader of the English language would be able to tell you that. Unknown to some is that the not-for-profit status does not mean that the hospital will not make money; the status has nothing to do with a hospitals bottom line. Just ask any charity that brings in millions of dollars.

The most significant variation between non-profit and for-profit hospitals is tax status. Not-for-profit hospitals are exempt from state and local taxes. Some say that for-profit hospitals have to be more cost-effective because they have sales taxes and property taxes. I can understand that sentiment. Sales taxes and property taxes are nothing to sneeze at.

The organizational structure and culture also varies at for-profit hospitals rather than not-for-profit hospitals. For-profit hospitals have to answer to shareholders and/or investors. Those that are publicly traded may have a high attrition rate at the top executive level because when poor performance occurs heads tend to roll.

Bargaining power is another big difference between for-profit and non-profit. For-profit has it while non-profit, generally, do not. The imbalance of bargaining power comes into play when the government negotiates its managed care contracts. I also believe that bargaining power is a strong catalyst in the push for mergers. Being a minnow means that you have insect larvae and fish eggs to consume. Being a whale, however, allows you to feed on sea lion, squid, and other larger fish.

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Merger Mania

A report conducted by the Health Research Institute showed 255 healthcare merger and acquisition (M&A) deals in the second quarter of 2018. Just the second quarter! According to the report, deal volume is up 9.4% since last year.

The most active sub-sector in the second quarter of 2018 is long-term care, with 104 announced healthcare M&A deals representing almost 41% of deal volume.

The trend today is that for-profit hospitals are buying up smaller, for-profit hospitals and, any and all, not-for-profit hospitals. The upshot is that hospitals are growing larger, more massive, more “corporate-like,” and less community-based. Is this trend positive or negative? I will have to research whether the prices of services increase at hospitals that are for-profit rather than not-for-profit, but I have a gut feeling that they do. Not that prices are the only variable to determine whether the merger trend is positive or negative. From the hospital’s perspective, I would much rather be the whale, not the minnow. I would feel much more comfortable swimming around.

My opinion is that, as our health care system veers toward value-based reimbursement and this metamorphous places financial pressure on providers, health care providers are struggling for more efficient means of cost control. The logical solution is to merge and buy up the smaller fish until your entity is a whale. Whales have more bargaining power and more budget.

In 2017, 29 for-profit companies bought 18 for-profit hospitals and 11 not-for-profits, according to an analysis for Kaiser Health News.

10 hospital M&A transactions involved health care organizations with net revenues of $1 billion or more in 2017.

Here, in NC, Mission Health, a former, not-for-profit hospital in Asheville, announced in March 2018 that HCA Healthcare, the largest, for-profit, hospital chain would buy it for $1.5 billion. The NC Attorney General had to sign off on the deal since the deal involved a non-profit turning for-profit, and he did ultimately did sign off on it.

Regardless your opinion on the matter, merger mania has manifested. Providers need to determine whether they want to be a whale or a minnow.