Blog Archives

New Revisions to Stark Law: Beware the “Per-Click Lease” – Maybe?

Scenario: You have an arrangement with your local hospital. You are a urologist and your practice owns a laser machine. You lease your laser machine to Hospital A, and your lease allows you to receive additional, but fair market value, money depending on how often your machine is used. Legal?

A new Final Ruling from the Centers for Medicare and Medicaid Services (CMS) provides murky guidance.

CMS finalized the 2017 Medicare Physician Fee Schedule (PFS) rule, which took effect on January 1, 2017. There have been few major revisions to the Stark Law since 2008…until now. The Stark Law is named for United States Congressman Pete Stark (D-CA), who sponsored the initial bill in 1988. Politicians love to name bills after themselves!

Absent an exception, the Stark Law prohibits a physician from referring Medicare patients for certain designated health services (“DHS”), for which payment may be made under Medicare, to any “entity” with which the physician (or an immediate family member) has a “financial relationship.” Conversely, the statute prohibits the DHS-furnishing entity from filing claims with Medicare for those referred services.

Despite the general prohibition on potentially self-interested referrals, the Stark Law permits Medicare referrals by physicians to entities in which they have a financial interest in certain limited circumstances. But these circumstances are limited and must be followed precisely and without deviation.

These exceptions are created by legally excluding some forms of compensation agreements and ownership interests from the definition of “financial relationship,” thus allowing both the relationships and the referrals. See 42 U.S.C. § 1395nn(b)-(e).

One of such exceptions to the Stark Law is the equipment lease exception.

This equipment lease exception to Stark law allows a financial relationship between physicians and hospitals for the lease of equipment, only if the lease (1) is in writing; (2) assigns the use of the equipment exclusively to the hospital; (3) lasts for a term of at least one year; (4) sets rental charges in advance that are consistent with fair market value and “not determined in a manner that takes into account the volume or value of any referrals or other business generated between the parties”; (5) satisfies the standard of commercial reasonableness even absent any referrals; and (6) meets “such other requirements as the Secretary may impose by regulation as needed to protect against program or patient abuse.”

For example, like the scenario above, a urology group owns and leases a laser machine to Hospital A. As long as the lease meets the criteria listed above, the urologists may refer Medicare patients to Hospital A to their hearts’ content – even though the urologists benefit financially from their own referrals.

However, what if the monetary incentive is tied to the amount the machine is actually used – or the “per-click lease?”

In a court case decided in January 2015, Council for Urological Interests v. Burwell, a D.C. circuit court decided that CMS’ ban on per-click leases was unreasonable.

In CMS’ Final Ruling, effective January 1, 2017, CMS again re-issued the per-click lease ban. But CMS’ revised ban appears to be more parochial in scope. CMS states that it “did not propose and [is] not finalizing an absolute prohibition on rental charges based on units of service furnished” and that “[i]n general, per-unit of service rental charges for the rental of office space or equipment are permissible.” As CMS had previously stated, the per-click ban applies only “to the extent that such charges reflect services provided to patients referred by the lessor to the lessee.”

Considering how unclear the Final Rule is – We are banning per-click leases, but not absolutely – expect lawsuits to clarify. In the meantime, re-visit your equipment leases. Have your attorney review for Stark compliance – because for the first time since 2008, major amendments to Stark Law became effective January 1, 2017.

Medicaid Managed Care Organizations: They Ain’t No Jesus!

Many of my clients come to me because a managed care organization (MCO) terminated or refused to renew their Medicaid contracts. These actions by the MCOs cause great financial distress and, most of the time, put the health care provider out of business. My team and I file preliminary injunctions in order to maintain status quo (i.e., allow the provider to continue to bill for and receive reimbursement for services rendered) until an administrative law judge (ALJ) can determine whether the termination (or refusal to contract with) was arbitrary, capricious, or, even, authorized by law.

With so many behavioral health care providers receiving terminations, I wondered…Do Medicaid recipients have adequate access to care? Are there enough behavioral health care providers to meet the need? I only know of one person who could feed hundreds with one loaf of bread and one fish – and He never worked for the MCOs!

On April 25, 2016, the Centers for Medicare and Medicaid Services released its massive Medicaid and Children’s Health Insurance Program (CHIP) managed care final rule (“Final Rule”).

Network adequacy is addressed. States are required to develop and make publicly available time and distance network adequacy standards for primary care (adult and pediatric), OB/GYN, behavioral health, adult and pediatric specialist, hospital, pharmacy, and pediatric dental providers, and for additional provider types as determined by CMS.

Currently, 39 states and the District of Columbia contract with private managed care plans to furnish services to Medicaid beneficiaries, and almost two thirds of the 72 million Medicaid beneficiaries are enrolled in managed care.

Access to care has always been an issue. Our Code of Federal Regulations require adequate access to quality health care coverage for Medicaid/care recipients. See blog. And blog.

However, Section 30A of the Social Security Act, while important, delineates no repercussions for violating such access requirements. You could say that the section “has no teeth,” meaning there is no defined penalty for a violation. Even more “toothless” is Section 30A’s lack of definition of what IS an adequate network? There is no publication that states what ratio of provider to recipient is acceptable.

Enter stage right: Final Rule.

The Final Rule requires states to consider certain criteria when determining adequacy of networks in managed care. Notice – I did not write the MCOs are to consider certain criteria in determining network adequacy. I have high hopes that the Final Rule will instill accountability and responsibility on our single state entity to maintain constant supervision on the MCOs [insert sarcastic laughter].

The regulation lists factors states are to consider in setting standards, including the ability of providers to communicate with limited English proficient enrollees, accommodation of disabilities, and “the availability of triage lines or screening systems, as well as the use of telemedicine, e-visits, and/or other evolving and innovative technological solutions.” If states create exceptions from network adequacy standards, they must monitor enrollee access on an ongoing basis.

The Final Rule marks the first major overhaul of the Medicaid and CHIP programs in more than a decade. It requires states to establish network adequacy standards in Medicaid and CHIP managed care for providers. § 457.1230(a) states that “[t]he State must ensure that the services are available and accessible to enrollees as provided in § 438.206 of this chapter.” (emphasis added).

Perhaps now the MCOs will be audited! Amen!

CMS Releases Final Rule On Return of Overpayments

Written by: David Leatherberry, partner in Gordon &Rees‘ San Diego office

The Centers for Medicare & Medicaid Services released its final rule today on the return of overpayments. The final rule requires providers and suppliers receiving funds under the Medicare/Medicaid program to report and return overpayments within 60 days of identifying the overpayment, or the date a corresponding cost report is due, whichever is later. As published in the February 12, 2016 Federal Register, the final rule clarifies the meaning of overpayment identification, the required lookback period, and the methods available for reporting and returning identified overpayments to CMS. See https://www.federalregister.gov/articles/2016/02/12/2016-02789/medicare-program-reporting-and-returning-of-overpayments.

Identification

The point in time in which an overpayment is identified is significant because it triggers the start of the 60-day period in which overpayments must be returned. CMS originally proposed that an overpayment is identified only when “the person has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment.” The final rule changes the meaning of identification, stating that “a person has identified an overpayment when the person has or should have, through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment. The change places a burden on healthcare providers and suppliers to have reasonable policies and programs in place which monitor the receipt of Medicare/Medicaid payments.

6-Year Lookback Period

The final rule also softens the period for which health care providers and suppliers may be liable for the return of overpayments. As the rule was originally proposed, CMS required a 10-year lookback period, consistent with the False Claims Act. Now, overpayments must be reported and returned only if a person identifies the overpayment within six years of the date the overpayment was received.

Guidance in Reporting and Returning Overpayments

The final rule provides that providers and suppliers must use an applicable claims adjustment, credit balance, self-reported refund, or other appropriate process to satisfy the obligation to report and return overpayments. If a health care provider or supplier has reported a self-identified overpayment to either the Self-Referral Disclosure Protocol managed by CMS or the Self-Disclosure Protocol managed by the Office of the Inspector General (OIG), the provider or supplier is considered to be in compliance with the provisions of this rule as long as they are actively engaged in the respective protocol.