Category Archives: Legal Remedies for Medicaid Providers
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.
Effective January 2, 2019, the Center for Medicare and Medicaid Services (CMS) radically changed its guidance on the use of extrapolation in audits by recovery audit contractors (RACs), Medicare administrative contractors (MACs), Unified Program Integrity Contractors (UPICs), and the Supplemental Medical Review Contractor (SMRC).
Extrapolation is the tsunami in Medicare/caid audits. The auditor collects a small sample of claims to review for compliance. She then determines the “error rate” of the sample. For example, if 50 claims are reviewed and 10 are found to be noncompliant, then the error rate is set at 20%. That error rate is applied to the universe, which is generally a three-year time period. It is assumed that the random sample is indicative of all your billings regardless of whether you changed your billing system during that time period of the universe or maybe hired a different biller.
With extrapolated results, auditors allege millions of dollars of overpayments against health care providers…sometimes more than the provider even made during that time period. It is an overwhelming wave that many times drowns the provider and the company.
Prior to this recent change to extrapolation procedure, the Program Integrity Manual (PIM) offered little guidance to the proper method for extrapolation.
Well, Change Request 10067 – overhauled extrapolation in a HUGE way.
The first modification to the extrapolation rules is that the PIM now dictates when extrapolation should be used.
Determining When a Statistical Sampling May Be Used. Under the new guidance, a contractor “shall use statistical sampling when it has been determined that a sustained or high level of payment error exists. The use of statistical sampling may be used after documented educational intervention has failed to correct the payment error.” This guidance now creates a three-tier structure:
- Extrapolation shall be used when a sustained or high level of payment error exists.
- Extrapolation may be used after documented educational intervention (such as in the Targeted Probe and Educate (TPE) program).
- It follows that extrapolation should not be used if there is not a sustained or high level of payment error or evidence that documented educational intervention has failed.
“High level of payment error” is defined as 50% or greater. The PIM also states that the contractor may review the provider’s past noncompliance for the same or similar billing issues, or a historical pattern of noncompliant billing practice. This is HUGE because so many times providers simply pay the alleged overpayment amount if the amount is low or moderate in order to avoid costly litigation. Now those past times that you simply pay the alleged amounts will be held against you.
Another monumental modification to RAC audits is that the RAC auditor must receive authorization from CMS to go forward in recovering from the provider if the alleged overpayment exceeds $500,000 or is an amount that is greater than 25% of the provider’s Medicare revenue received within the previous 12 months.
The identification of the claims universe was also re-defined. Even CMS admitted in the change request that, on occasion, “the universe may include items that are not utilized in the construction of the sample frame. This can happen for a number of reasons, including, but not limited to: (1) Some claims/claim lines are discovered to have been subject to a prior review, (2) The definitions of the sample unit necessitate eliminating some claims/claim lines, or (3) Some claims/claim lines are attributed to sample units for which there was no payment.”
There are many more changes to discuss, but I have been asked to appear on RACMonitor to present the details on February 19, 2019. So sign up to listen!!!
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.
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.
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.
When action happens in the Medicare/caid world, it happens quickly. Sometimes you do not receive adequate notice to coordinate continuity of care for your consumers or patients. For example, on August 3, 2018, the Center for Medicare and Medicaid Services announced that at midnight on August 18, 2018, it would be terminating the contract between CMS and ESEC, LLC, an Oklahoma-based surgery center.
CMS provided ESEC 15 days notice of complete termination of Medicare and Medicaid reimbursements. Now I do not know the details of ESEC’s financial reliance on Medicare or Medicaid, but, these days, few providers are solely third-party pay or cash-only. I can only assume that ESEC is scrambling to initiate a lawsuit to remain afloat and open for business. Or ESEC is praying for a “rescind” by correcting whatever issues it purportedly had. Personally, I would not count on a possible rescind. I would be proactively seeking legal intervention.
Here are some examples of recent terminations and the notice received by the providers:
- Baylor St. Luke’s Medical Center’s heart transplant program lost federal funding August 17, 2018. The hospital will no longer be able to bill Medicare and Medicaid for heart transplants.
- Effective August 9, 2018, Brookwood Baptist Medical Center’s Medicare contract was terminated. The notice was published July 25, 2018.
- As of August 12, 2018, The Grandview Nursing & Rehabilitation Facility’s Medicare contract was terminated. Notice of the termination was published August 1, 2018.
- As of September 1, 2018, Compassus-Kansas City, a hospice company, will lose its Medicare contract. Notice was provided August 17, 2018.
- On August 3, 2018, CMS announced that it was terminating Deligent Health Services Inc.’s Medicare and Medicaid contact, effective December 5, 2017. (That is quite a retroactive timeframe).
Can Careless Judy put a healthcare provider out of business?
This happens all the time. Sure, ESEC probably had knowledge that CMS was investigating it. However, CMS has the authority to issue these public notices of termination without holding a hearing to determine whether CMS’ actions are accurate. What if Careless Judy in Program Integrity made a human error and ESEC actually does meet the standards of care. But you see, Careless Judy accidentally used the minimum standards of care from 2008 instead of 2018. It’s an honest mistake. She had no malice against ESEC. But, my point is – where is the mechanism that prevents a surgical ambulatory center from going out of business – just because Careless Judy made a mistake?
To look into whether any legal mechanism exists to prevent Careless Judy from putting the ambulatory center out of business, I turn to the legal rules.
42 CFR 488.456 governs terminations of provider agreements. Subsection (a) state that termination “ends – (1) Payment to the facility; and (2) Any alternative remedy.”
Subsection (b) states that CMS or the State may terminate the contract with the provider if the provider “Is not in substantial compliance with the requirements of participation, regardless whether immediate jeopardy is present.” On the bright side, if no immediate jeopardy exists then CMS or the State must give 15 days notice. If there is found to be immediate jeopardy, the provider get 2 days. But who determines what is “substantial compliance?” Careless Judy?
42 CFR 489.53 lists the reasons on which CMS may rely to terminate a provider. Although, please note, that the regulations use the word “may” and not “must.” So we have some additional guidance as to when a provider’s contract may be terminated, but it still seems subjective. Here are the reasons:
- The provider is not complying with the provisions of title XVIII and the applicable regulations of this chapter or with the provisions of the agreement.
- The provider or supplier places restrictions on the persons it will accept for treatment and it fails either to exempt Medicare beneficiaries from those restrictions or to apply them to Medicare beneficiaries the same as to all other persons seeking care.
- It no longer meets the appropriate conditions of participation or requirements (for SNFs and NFs) set forth elsewhere in this chapter. In the case of an RNHCI no longer meets the conditions for coverage, conditions of participation and requirements set forth elsewhere in this chapter.
- It fails to furnish information that CMS finds necessary for a determination as to whether payments are or were due under Medicare and the amounts due.
- It refuses to permit examination of its fiscal or other records by, or on behalf of CMS, as necessary for verification of information furnished as a basis for payment under Medicare.
- It failed to furnish information on business transactions as required in § 420.205 of this chapter.
- It failed at the time the agreement was entered into or renewed to disclose information on convicted individuals as required in § 420.204 of this chapter.
- It failed to furnish ownership information as required in § 420.206 of this chapter.
- It failed to comply with civil rights requirements set forth in 45 CFR parts 80, 84, and 90.
- In the case of a hospital or a critical access hospital as defined in section 1861(mm)(1) of the Act that has reason to believe it may have received an individual transferred by another hospital in violation of § 489.24(d), the hospital failed to report the incident to CMS or the State survey agency.
- In the case of a hospital requested to furnish inpatient services to CHAMPUS or CHAMPVA beneficiaries or to veterans, it failed to comply with § 489.25 or § 489.26, respectively.
- It failed to furnish the notice of discharge rights as required by § 489.27.
- The provider or supplier refuses to permit copying of any records or other information by, or on behalf of, CMS, as necessary to determine or verify compliance with participation requirements.
- The hospital knowingly and willfully fails to accept, on a repeated basis, an amount that approximates the Medicare rate established under the inpatient hospital prospective payment system, minus any enrollee deductibles or copayments, as payment in full from a fee-for-service FEHB plan for inpatient hospital services provided to a retired Federal enrollee of a fee-for-service FEHB plan, age 65 or older, who does not have Medicare Part A benefits.
- It had its enrollment in the Medicare program revoked in accordance to § 424.535 of this chapter.
- It has failed to pay a revisit user fee when and if assessed.
- In the case of an HHA, it failed to correct any deficiencies within the required time frame.
- The provider or supplier fails to grant immediate access upon a reasonable request to a state survey agency or other authorized entity for the purpose of determining, in accordance with § 488.3, whether the provider or supplier meets the applicable requirements, conditions of participation, conditions for coverage, or conditions for certification.
As you can see from the above list of possible termination reasons, many of which are subjective, it could be easy for Careless Judy to terminate a Medicare contract erroneously, based on inaccurate facts, or without proper investigation.
The same is true for Medicaid; your contract can be terminated on the federal or state level. The difference is that at the state level, Careless Judy is a state employee, not a federal.
42 CFR 498.5 governs appeal rights for providers contract terminations. Subsection (b) states that “Any provider dissatisfied with an initial determination to terminate its provider agreement is entitled to a hearing before an ALJ.”
42 CFR 498.20 states that an initial determination by CMS (like a contract termination) is binding unless it is reconsidered per 42 CFR 498.24.
A Stay of the termination should suspend the termination until the provider can obtain a hearing by an impartial tribunal until the appeal has been completed. The appeal process and supposed automatic Stay of the termination is the only protection for the provider from Careless Judy. Or filing an expensive injunction.
There is a federal regulation that is putting health care providers out of business. It is my legal opinion that the regulation violates the U.S. Constitution. Yet, the regulation still exists and continues to put health care providers out of business.
Because so far, no one has litigated the validity of the regulation, and I believe it could be legally wiped from existence with the right legal arguments.
How is this important?
Currently, the state and federal government are legally authorized to immediately suspend your Medicare or Medicaid reimbursements upon a credible allegation of fraud. This immense authority has put many a provider out of business. Could you survive without any Medicare or Medicaid reimbursements?
The federal regulation to which I allude is 42 CFR 455.23. It is a federal regulation, and it applies to every single health care provider, despite the service type allowed by Medicare or Medicaid. Home care agencies are just as susceptible to an accusation of health care fraud as a hospital. Durable medical equipment agencies are as susceptible as dentists. Yet the standard for a “credible allegation of fraud” is low. The standard for which the government can implement an immediate withhold of Medicaid/care reimbursements is lower than for an accused murderer to be arrested. At least when you are accused of murder, you have the right to an attorney. When you are accused to health care fraud on the civil level, you do not receive the right to an attorney. You must pay 100% out of pocket, unless your insurance happens to cover the expense for attorneys. But, even if your insurance does cover legal fees, you can believe that you will be appointed a general litigator with little to no knowledge of Medicare or Medicaid regulatory compliance litigation.
42 USC 455.23 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.
(2) The State Medicaid agency may suspend payments without first notifying the provider of its intention to suspend such payments.
(3) A provider may request, and must be granted, administrative review where State law so requires.”
In the very first sentence, which I highlighted in red, is the word “must.” Prior to the Affordable Care Act, this text read “may.” From my years of experience, every single state in America has used this revision from “may” to “must” for governmental advantage over providers. When asked for good cause, the state and or federal government protest that they have no authority to make a decision that good cause exists to suspend any reimbursement freeze during an investigation. But this protest is a pile of hooey.
In reality, if anyone could afford to litigate the constitutionality of the regulation, I believe that the regulation would be stricken an unconstitutional.
Here is one reason why: Due Process
The Fifth and Fourteenth Amendments to the Bill of Rights provide us our due process rights. Here is the 5th Amendment:
“No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”
There have been a long and rich history of interpretation of the due process clause. The Supreme Court has interpreted the due process clauses to provide four protections: (1) procedural due process (in civil and criminal proceedings), (2) substantive due process, (3) a prohibition against vague laws, and (4) as the vehicle for the incorporation of the Bill of Rights.
42 CFR 455.23 violates procedural due process.
Procedural due process requires that a person be allowed notice and an opportunity to be heard before a government official takes a person’s life, liberty, or property.
Yet, 42 CFR 455.23 allows the government to immediately withhold reimbursements for services rendered based on an allegation without due process and taking a provider’s property; i.e., money owed for services rendered. Isn’t this exactly what procedural due process was created to prevent???? Where is the fundamental fairness?
42 CFR 455.23 violates substantive due process.
The Court usually looks first to see if there is a fundamental right, by examining if the right can be found deeply rooted in American history and traditions.
Fundamental rights include the right to vote, right for protection from pirates on the high seas (seriously – you have that right), and the right to constitutional remedies. Courts have held that our right to property is a fundamental right, but to my knowledge, not in the context of Medicare/caid reimbursements owed; however, I see a strong argument.
If the court establishes that the right being violated is a fundamental right, it applies strict scrutiny. This test inquires into whether there is a compelling state interest being furthered by the violation of the right, and whether the law in question is narrowly tailored to address the state interest.
Where the right is not a fundamental right, the court applies a rational basis test: if the violation of the right can be rationally related to a legitimate government purpose, then the law is held valid.
Taking away property of a Medicare/caid provider without due process violates substantive due process. The great thing about writing your own blog is that no one can argue with you. Playing Devil’s advocate, I would anticipate that the government would argue that a suspension or withhold of reimbursements is not a “taking” because the withhold or suspension is temporary and the government has a compelling reason to deter health care fraud. To which, I would say, yes, catching health care fraud is important – I am in no way advocating for fraud. But important also is the right to be innocent until proven guilty, and in civil cases, our deeply-rooted belief in the presumption of innocence is upheld by the action at issue not taking place until a hearing is held.
For example, if I sue my neighbor and declare that he is encroaching on my property, the property line is not moved until a decision is in my favor.
Another example, if I sue my business partner for breach of contract because she embezzled $1 million from me, I do not get the $1 million from her until it is decided that she actually took $1 million from me.
So to should be – if a provider is accused of fraud, property legally owned by said provider cannot just be taken away. That is a violation of substantive due process.
42 CFR 455.23 violates the prohibition against vague laws
A law is void for vagueness if an average citizen cannot understand it. The vagueness doctrine is my favorite. According to census data, there are 209.3 million people in the US who are over 24-years. Of those over 24-years-old, 66.9 million have a college degree. 68% do not.
Although here is a quick anecdote: Not so sure that a college degree is indicative of intelligence. A recent poll of law students at Columbia University showed that over 60% of the students, who were polled, could not name what rights are protected by the 1st Amendment. Once they responded “speech,” many forgot the others. In case you need a refresher for the off-chance that you are asked this question in an impromptu interview, see here.
My point is – who is to determine what the average person may or may not understand?
Back to why 42 CFR 455.23 violates the vagueness doctrine…
Remember the language of the regulations: “The State Medicaid agency must suspend all Medicaid payments to a provider after the agency determines there is a credible allegation of fraud…”
“Credible allegation of fraud” is defined as an allegation, which has been verified by the State, from any source, including but not limited to the following:
- Fraud hotline complaints.
- Claims data mining.
- Patterns identified through provider audits, civil false claims cases, and law enforcement investigations. Allegations are considered to be credible when they have indicia of reliability and the State Medicaid agency has reviewed all allegations, facts, and evidence carefully and acts judiciously on a case-by-case basis.”
With a bit of research, I was able to find a written podcast published by CMS. It appears to be a Q and A between two workers at CMS discussing whether they should suspend a home health care agency’s reimbursements, similar to a playbook. I assume that it was an internal workshop to educate the CMS employees considering that the beginning of the screenplay begins with a “canned narrator” saying “This is a Medicaid program integrity podcast.”
The weird thing is that when you pull up the website – here – you get a glimpse of the podcast, but, at least on my computer, the image disappears in seconds and does not allow you to read it. I encourage you to determine whether this happens you as well.
While the podcast shimmered for a few seconds, I hit print and was able to read the disappearing podcast. As you can see, it is a staged conversation between “Patrick” and “Jim” regarding suspicion of a home health agency falsifying certificates of medical necessity.
On page 3, “Jim” says, “Remember the provider has the right to know why we are taking such serious action.”
But if your Medicare/caid reimbursements were suddenly suspended and you were told the suspension was based upon “credible allegations of fraud,” wouldn’t you find that reasoning vague?
42 CFR 455.23 violates the right to apply the Bill of Rights to me, as a citizen
This esoteric doctrine only means that the Bill of Rights apply to State governments. [Why do lawyers make everything so hard to understand?]
5th Circuit Finds Subject Matter Jurisdiction For Medicare and Medicaid Providers – Why Collards Matter
“I’d like some spaghetti, please, and a side of meatballs.” – This sentence is illogical because meatballs are integral to spaghetti and meatballs. If you order spaghetti – and -meatballs, you are ordering “spaghetti and meatballs.” Meatballs on the side is not a thing.
Juxtapose, a healthcare provider defending itself from an alleged overpayment, But during the appeal process undergoes a different penalty – the state or federal government begins to recoup future funds prior to a decision that the alleged recoupment is authorized, legal, or warranted. When a completely new issue unrelated to the allegation of overpayment inserts itself into the mix, then you have spaghetti and meatballs with a side of collard greens. Collard greens need to be appealed in a completely different manner than spaghetti and meatballs, especially when the collard greens could put the company out of business because of the premature and unwarranted recoupments without due process.
I have been arguing this for years based off of, not only, a 1976 Supreme Court case, but multiple state case law, as well as, success I have had in the federal and administrative courts, and BTW – logic.
On March 27, 2018, I was confirmed again. The Fifth Circuit Court of Appeals decided a landmark case for Medicare and Medicaid providers across the country. The case, Family Rehab., Inc. v Azar, 2018 U.S. App. LEXIS 7668, involved a Medicare home health service provider, which was assessed for approximately $7.8 million in Medicare overpayments. Family Rehab, the plaintiff in the case, relied on 88% to 94% of its revenue from Medicare. The company had timely appealed the alleged overpayment, and it was at the third level of the Medicare five step process for appeals. See blog. But there is a 3 – 5 year backlog on the third level, and the government began to recoup the $7.8 million despite the ongoing appeal. If no action were taken, the company would be out of business well-before any ALJ could rule on the merits of the case, i.e. whether the recoupment was warranted. How is that fair? The provider may not owe $7.8 million, but before an objective tribunal decides what is actually owed, if anything, we are going to go ahead and take the money and reap the benefit of any interest accrued during the time it takes the provider to get a hearing.
The backlog for Medicare appeals at the ALJ level is unacceptably long. See blog and blog. However, the federal regulations only prevent recoupment during the appeal process during the first and second levels. This is absolutely asinine and should be changed considering we do have a clause in the Constitution called “due process.” Purported criminals receive due process, but healthcare providers who accept Medicare or Medicaid, at times, do not.
At the third level of appeal, Family Rehab underwent recoupments, even though it was still appealing the decision, which immediately stifled Family Rehab’s income. Family Rehab, because of the premature recoupments, was at risk of losing everything, going bankrupt, firing its staff, and no longer providing medically necessary home health services for the elderly. This situation mimics a situation in which I represented a client in northern Indiana who was losing its Medicaid contract. I also successfully obtained a preliminary injunction preventing the provider from losing its Medicaid contract. See blog.
It is important to note that in this case the ZPIC had audited only 43 claims. Then it used a statistical method to extrapolate the alleged over-billings and concluded that the alleged overpayment was $7,885,803.23. I cannot tell you how many times I have disputed an extrapolation and won. See blog.
42 USC 1395(f)(f)(d)(1)(A) states that the ALJ shall conduct and conclude the hearing and render a decision no later than 90 days after a timely request. Yet the Fifth Circuit Court of Appeals found that an ALJ hearing would not be forthcoming not within 90 days or even 900 days. The judge noted in his decision that the Medicare appeal backlog for an ALJ hearing was 3 – 5 years. The District Court held that it lacked subject matter jurisdiction because Family Rehab had not exhausted its administrative remedies. Family Rehab appealed.
On appeal, Family Rehab argued the same arguments that I have made in the past: (1) its procedural due process and ultra vires claims are collateral to the agency’s appellate process; and (2) going through the appellate process would mean no review at all because the provider would be out of business by the time it would be heard by an ALJ.
What does collateral mean? Collard greens are collateral. When you think collateral; think collards. Collard greens do not normally come with spaghetti and meatballs. A collateral issue is an issue that is entirely collateral to a substantive agency decision and would not be decided through the administrative appeal process. In other words, even if Family Rehab were to only pursue the $7.8 million overpayment issue through the administrative process, the issue of having money recouped and the damage to the company that the recoupment was causing would never be heard by the ALJ because those “collateral” issues are outside the ALJ’s purview. The premature recoupment issue could not be remedied by an ALJ. The Fifth Circuit Court of Appeals agreed.
The collateral argument also applies to terminations of Medicare and Medicaid contracts without due process. In an analogous case (Affiliated Professional), the provider argued that the termination of its Medicare contract without due process violated its right to due process and the Equal Protection Clause and was successful.
The upshot is obvious, if the Court must examine the merits of the underlying dispute, delve into the statute and regulations, or make independent judgments as to plaintiff’s eligibility under a statute, the claim is not collateral.
The importance of this case is that it verifies my contention that if a provider is undergoing a recoupment or termination without due process, there is relief for that provider – an injunction stopping the premature recoupments or termination until due process has been completed.
They say that lightning never strikes the same place twice, but tell that to my colleague Bill. Bill has been struck by lightning twice and has lived to tell the story. Granted, he was not physically standing in the same place that he was struck the first time as when he was hit by lightning the second time – so lightning technically didn’t hit the same place twice. But it did strike the same person twice. Maybe Bill is just extremely unlucky, or maybe Bill is extremely lucky because he lived through the incidents.
An intense shock can severely impair most of the body’s vital functions. Cardiac arrest is common. Yet Bill lived. Twice.
No one ever thinks they will get struck by lightning. But it happens. According to the National Weather Service, so far this year, lightning strikes have killed at least 20 people in the US, and that does not even take into consideration the people who were just injured, like my pal Bill.
A lightning strike is a massive electrical discharge between the atmosphere and an earth-bound object. A lightning bolt can heat the surrounding air to 50,000 degrees Fahrenheit—that’s five times hotter than the sun—and can contain up to 300kV of energy.
Yet most people do survive, in part because lightning rarely passes through the body.
Instead, a “flashover” occurs, meaning that the lightning zips over the body, traveling via ultra-conductive sweat (and often rainwater), which provides an external voltage pathway around the body. When people do die from a lightning strike, it is usually due to an electrical discharge-induced hear attack. A body hit by lightning will show various signs of trauma.
Like a gunshot, a lightning strike causes both an exit and entrance wound, marking where the current both entered and left the victim. Lichtenberg scarring, which outlines ruptured blood vessels, frequently covers the body in odd, almost beautiful, spiderweb patterns.
Surprisingly enough, many lightning strike survivors do not remember being struck. Instead, the only evidence of the traumatic event is burnt, displaced clothing and marks along the body.
For instance, many lightning strike survivors report memory issues, trouble with concentration and severe headaches, all of which last decades after the initial strike.
Due to the rarity of lightning strike cases, less time and resources have been devoted to better understanding how these strikes impact long-term brain function. An unpublished study by medical doctor Mary Ann Cooper found that there were “significant differences in brain activity between lightning-strike victims and healthy people as they performed mental-aptitude tests.”
Aside from impacting long-term brain function, lightning strikes are also known to blow out eardrums, prompting constant muscle twitches and moderate to severe nerve damage. Overall, the effects of a lightning strike may range from a slight inconvenience to a debilitating, lifelong struggle. In the case of my colleague, you would never be able to tell mind looking at him that he has been hit by lightning twice.
Why is this – extensive – discussion about lightning strikes relevant? – Or is it not?
If you are a health care provider and accept Medicare or Medicaid, the risk of an audit far exceeds your chances of getting struck by lightning. In FY 2016, CMS continued its use of the Affordable Care Act authority to suspend Medicare payments to providers during an investigation of a credible allegation of fraud. CMS also has authority to suspend Medicare payments if reliable information of an overpayment exists. During FY 2016, there were 508 payment suspensions that were active at some point during the fiscal year. Of the 508 payment suspensions, 291 new payment suspensions were imposed during FY 2016.
Medicare and Medicaid audits far exceed lightning strikes. Yet, providers believe in their heart of hearts that and on an audit (or an audit with bad results) will never happen to them, which causes providers to not engage in attorney until after the lightning strikes. Then it’s too late, and you have Lichtenberg scarring across your arm.
There is scene in Breaking Bad in which Saul, the attorney, stops a person from talking. He says, “Give me a dollar. Don’t tell me anything until you give me a dollar. Once money is exchanged, we will have attorney-client privilege.” What Saul was saying is that the exchange of money catalyzed the duty for Saul to keep all conversation confidential.
This was a low-point of legal-fiction television. It made great drama with zero accuracy.
The question is why should you have an attorney on retainer?
The obvious response is that you can have confidential conversations with said attorney at your beck and call. The honest truth is that you do not have to have an attorney on retainer in order for your conversations to be confidential. But is smart to do so, and I will tell you why.
If you call me and I have never represented you and you ask me a legal question, our conversation is legally protected, even if you hire a different attorney.
No – the reason to have an attorney on retainer is to be able to consult him or her with legal questions on a daily basis, and, especially of there is an ongoing audit. Most of my clients do not contact me when they receive the document request. They think, “Oh, this is no big deal. I will give my records to [state] or [federal] – [and/or its contractors] government and they will determine that my [Medicare] or [Medicaid] records are amazing. In fact the [state] or [federal] government my even ask me to educate other providers on what pristine records should look like. I got this. Easy, peasy, lemon-squeezey.” They contact me when they get an accusation of an alleged overpayment of $5 million. Lichtenberg scarring has already occurred.
The smartest clients contact me prior to receiving an alleged overpayment of $12 million or an accusation of fraud. They contact me the moment they receive a notice of an audit or a request for documents…before ever submitting documents to the government.
Because, regardless the type of provider, be it dentist, behavioral counseling, podiatrist, chiropractor, or hospital, understand that every communication with a government auditor and/or contractor is admissible in court – if the communication does not go through an attorney. When the [state/federal] auditor asks to see a record and you say, “Let me get it from my off-site storage facility” – BAM – HIPAA violation. When the state/federal auditor asks to see a record and you say, “Here it is,” and fail to keep a copy for yourself, there can be discrepancy in the future as to what you actually provided. And you are in a “he said she said” battle – never good.
On the other hand, if you have an attorney on retainer, you can ask any question you need, you can get any advice you desire, and it’s all confidential. It is as though you have Siri in your back pocket. It’s the 411 for legal information. It’s an ATM for legal advice. AND it is all confidential.
Next time you think to yourself, “Self, I will ace any Medicaid or Medicare audit. I don’t need counsel. I can talk to the auditors myself without an attorney. I got this.”
Think again. [Don’t, necessarily, call Saul, but call someone.] Because, like lightning strike victims, you may not even remember the audit. Until you are scarred.
Here is an article that I wrote that was first published on RACMonitor on March 15, 2018:
All audits are questionable, contends the author, so appeal all audit results.
Providers ask me all the time – how will you legally prove that an alleged overpayment is erroneous? When I explain some examples of mistakes that Recovery Audit Contractors (RACs) and other health care auditors make, they ask, how do these auditors get it so wrong?
First, let’s debunk the notion that the government is always right. In my experience, the government is rarely right. Auditors are not always healthcare providers. Some have gone to college. Many have not. I googled the education criteria for a clinical compliance reviewer. The job application requires the clinical reviewer to “understand Medicare and Medicaid regulations,” but the education requirement was to have an RN. Another company required a college degree…in anything.
Let’s go over the most common mistakes auditors make that I have seen. I call them “oops, I did it again.” And I am not a fan of reruns.
- Using the Wrong Clinical Coverage Policy/Manual/Regulation
Before an on-site visit, auditors are given a checklist, which, theoretically, is based on the pertinent rules and regulations germane to the type of healthcare service being audited. The checklists are written by a government employee who most likely is not an attorney. There is no formal mechanism in place to compare the Medicare policies, rules, and manuals to the checklist. If the checklist is erroneous, then the audit results are erroneous. The Centers for Medicare & Medicaid Services (CMS) frequently revises final rules, changing requirements for certain healthcare services. State agencies amend small technicalities in the Medicaid policies constantly. These audit checklists are not updated every time CMS issues a new final rule or a state agency revises a clinical coverage policy.
For example, for hospital-based services, there is a different reimbursement rate depending on whether the patient is an inpatient or outpatient. Over the last few years there have been many modifications to the benchmarks for inpatient services. Another example is in behavioral outpatient therapy; while many states allow 32 unmanaged visits, others have decreased the number of unmanaged visits to 16, or, in some places, eight. Over and over, I have seen auditors apply the wrong policy or regulation. They apply the Medicare Manual from 2018 for dates of service performed in 2016, for example. In many cases, the more recent policies are more stringent that those of two or three years ago.
- A Flawed Sample Equals a Flawed Extrapolation
The second common blunder auditors often make is producing a flawed sample. Two common mishaps in creating a sample are: a) including non-government paid claims in the sample and b) failing to pick the sample randomly. Both common mistakes can render a sample invalid, and therefore, the extrapolation invalid. Auditors try to throw out their metaphoric fishing nets wide in order to collect multiple types of services. The auditors accidentally include dates of service of claims that were paid by third-party payors instead of Medicare/Medicaid. You’ve heard of the “fruit of the poisonous tree?” This makes the audit the fruit of the poisonous audit. The same argument goes for samples that are not random, as required by the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG). A nonrandom sample is not acceptable and would also render any extrapolation invalid.
- A Simple Misunderstanding
A third common blooper found with RAC auditors is simple misunderstandings based on lack of communication between the auditor and provider. Say an auditor asks for a chart for date of service X. The provider gives the auditor the chart for date of service X, but what the auditor is really looking for is the physician’s order or prescription that was dated the day prior. The provider did not give the auditor the pertinent document because the auditor did not request it. These issues cause complications later, because inevitably, the auditor will argue that if the provider had the document all along, then why was the document not presented? Sometimes inaccurate accusations of fraud and fabrication are averred.
- The Erroneous Extrapolation
Auditors use a computer program called RAT-STATS to extrapolate the sample error rate across a universe of claims. There are so many variables that can render an extrapolation invalid. Auditors can have too low a confidence level. The OIG requires a 90 percent confidence level at 25 percent precision for the “point estimate.” The size and validity of the sample matters to the validity of the extrapolation. The RAT-STATS outcome must be reviewed by a statistician or a person with equal expertise. An appropriate statistical formula for variable sampling must be used. Any deviations from these directives and other mandates render the extrapolation invalid. (This is not an exhaustive list of requirements for extrapolations).
- That Darn Purple Ink!
A fifth reason that auditors get it wrong is because of nitpicky, nonsensical reasons such as using purple ink instead of blue. Yes, this actually happened to one of my clients. Or if the amount of time with the patient is not denoted on the medical record, but the duration is either not relevant or the duration is defined in the CPT code. Electronic signatures, when printed, sometimes are left off – but the document was signed. A date on the service note is transposed. Because there is little communication between the auditor and the provider, mistakes happen.
The moral of the story — appeal all audit results.