Blog Archives
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.
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.
Exclusive: Medicaid: The State of the Union
Here is an article that I wrote as a Medicaid news update, state-by-state, as seen on RACMonitor.
The latest and greatest in Medicaid news, state by state.
While Medicare is a nationwide healthcare insurance program, Medicaid, the government-funded health insurance for the poor and developmentally disabled, is state-specific, generally speaking. The backbone of Medicaid is federal; federal regulations set forth the minimum requirements that states must follow. It is up to the states to decide whether to mandate more stringent or more regulatory oversight than is required by the federal regulations.
Why is it important for you to know the latest up-to-date information on Medicaid issues? First, if you accept Medicaid, you need to know. Secondly, if you are thinking about expanding into different states, you need to be aware of how Medicaid is handled there.
What is happening in your State?
| Alabama: | Alabama did not expand Medicaid. The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) recommended that Alabama improve its Medicaid security program, aligning it with federal requirements. The OIG also stated that Alabama also needs to provide adequate oversight to its contractors and address other vulnerabilities OIG found in its audit. Expect more audits here. In particular, the Medicaid Maternity Program is under the microscope. Apparently, healthcare providers that provide medically necessary services to women on the Maternity Program have been duped before, as some of the women enrolled had already given birth. Recoupment! |
| Alaska: | Alaska expanded Medicaid in 2015. Currently, lawmakers in the legislature here have introduced bills that would require the state to seek 20-hour work requirements for those enrolled in Medicaid. |
| Arizona: | Arizona expanded Medicaid, but with an approved section 1115 waiver. Arizona has failed to collect up to $36.7 million in rebates from prescription drug manufacturers since 2010 and may need to pay the federal government a portion of that amount, according to a new federal audit, which means more audits to reconcile the payback. Arizona State Rep. Kelli Butler wants to allow uninsured individuals to buy into the state’s Medicaid program. Butler is expected to introduce legislation to authorize a buy-in or direct state officials to study the proposal. The buy-in option would require consumers to pay the full cost of their insurance coverage. |
| Arkansas: | Arkansas expanded Medicaid, but with an approved section 1115 waiver. On March 5, 2018, it became the third state to win the Trump administration’s permission to compel Medicaid recipients to work or prepare for a job. The state’s program integrity is focusing its upcoming audits on home health, long-term care facilities, and inpatient hospital stays. |
| California: | California expanded Medicaid. The state’s Medicaid agency has posted draft language of a new state plan amendment (SPA) that would make major changes to Federally Qualified Health Center (FQHC) and Rural Health Clinic (RHC) reimbursement. If approved, the SPA would be retroactive to Jan. 1, 2018, so expect audits and recoupments. The proposed SPA would implement multiple new requirements for FQHC and RHCS. For example, the proposed productivity standard requires physicians to document 3,200 visits per year and applicable allied health professionals such as physician assistants and nurse practitioners to document 2,600 visits per year. In January 2018, Aetna received approval to participate in California’s Medicaid program as “Aetna Better Health of California.” |
| Colorado: | Colorado expanded Medicaid. Not unexpectedly, the state has one of the more lenient regulatory environments. For example, Colorado’s permissive approach to regulating more than 700 licensed residential and outpatient drug treatment centers got the attention of a congressional subcommittee investigating the drug rehab industry last year. Also, Colorado’s governor announced that he is not opposed to work requirements for Medicaid beneficiaries. |
| Connecticut: | Connecticut expanded Medicaid. The Connecticut Health Policy Project data shows that net pharmacy spending minus rebates from Connecticut’s Medicaid program tripled from 2000 to 2017. After rebates, Medicaid’s pharmacy costs decreased from $542 million in 2015 to $465 million in 2017, a drop of over 14 percent. Interestingly, on March 21, 2018, the state’s General Assembly increased Connecticut’s 8,500 home care workers’ wages, and adding worker’s compensation, even those workers are being compensated by Medicaid. The increased wage will rise to $16.25 per hour by 2020 and will cost the state, after federal Medicaid reimbursement, $725,790 in 2018, almost $7 million in 2019, and over $9.3 million in 2020. If you have a home health agency here, you better make sure that lawmakers are smart enough to increase the reimbursement rates; otherwise, a lot of home health agencies will go out of business. |
| Delaware: | Delaware expanded Medicaid, but since it is so small in size and population, the expansion only added approximately 10,000 Medicaid recipients. This year, after two years of increasing Medicaid spending by approximately $70 million, Delaware’s Medicaid costs are expected to decrease a small amount, even with the expansion. Beginning this year, Delaware gives additional weight to value-based care when determining payment. Rather than paying solely for volume of care – hospital stays, tests and procedures, regardless of outcomes – the state will pay for achieving optimal health for its Medicaid recipients. |
| Florida: | Florida did not expand Medicaid. Lawmakers are considering opioid prescription limits for Medicaid recipients. The proposals would limit prescriptions for opioids to three-day supplies, but also allow for up to seven-day supplies if physicians deem it medically necessary. If passed, I question whether lawsuits will be filed claiming that such a move violates the Equal Protection Clause of the Constitution, because it violates parity between Medicaid recipients and the private-pay insured. And what about the people suffering with chronic, long-term pain? (especially considering the state’s demographics). In other news, Gov. Rick Scott has proposed to transition the state’s Children’s Medical Services program to a private managed care organization, beginning in 2019. |
| Georgia: | Georgia did not expand Medicaid. Recently, the Georgia Department of Community Health mistakenly issued multiple Medicaid ID numbers to hundreds of patients. Those mistakes led the state and federal governments to make duplicate payments for care of some Medicaid patients. Now, Georgia is being asked to refund the federal government’s share of the duplicate payments — more than $665,000. Expect more audits to fund the repayment. |
| Hawaii: | Hawaii expanded Medicaid. But the state is cracking down on its providers. In an effort to improve fraud prevention, Hawaii is performing more comprehensive screening, credentialing, and enrollment for all Medicaid providers. Those of you who are already credentialed here, expect tougher standards for re-credentialing. |
| Idaho: | Idaho did not expand Medicaid, but it did expand dental coverage. On March 12, 2018, the state’s Senate passed a bill that restores Medicaid non-emergency dental coverage. The coverage was cut in 2011 during the recession. The bill, HB 465, already passed the House and now moves to Gov. Butch Otter. It is expected to cost $38 a year per patient. |
| Illinois: | Illinois expanded Medicaid. On Jan. 12, 2018, five nursing home operators filed a federal lawsuit against the state, arguing that low Medicaid payment rates and the claims backlog are jeopardizing patient care. The lawsuit was filed by Generations Health Care Network, Carlyle Healthcare Center, St. Vincent’s Home, Clinton Manor Living Center, and Extended Care Clinical, which operate 100 skilled nursing facilities throughout the state. Because of Section 30(A) of the Social Security Act (SSA), which mandates that reimbursement rates allow for quality of care, why aren’t more health care providers filing lawsuits to increase Medicaid reimbursement rates? |
| Indiana: | Indiana expanded Medicaid, but with an approved section 1115 waiver, which includes work requirements and adds premium penalties for tobacco users. The state also plans to use an enrollment block on members who fail to meet work requirements. Indiana focuses its audits on outliers: in other words, a provider that provides significantly more services than like-specialties. |
| Iowa: | Iowa expanded Medicaid, but with an approved section 1115 waiver. The state’s Department of Human Services announced on March 12, 2018 that Iowa is in the process of searching for additional managed care organizations for the current program. So if you have the capacity to act as an Managed Care Organization (MCO), throw your name in the ring. Because of pressure from the federal government, Iowa has implemented more prepayment reviews. Specifically, auditors are reviewing hospital discharge records for any sign of noncompliance. |
| Kansas: | Kansas did not expand Medicaid. On Feb. 15, 2018, the American Civil Liberties Union (ACLU) filed a federal class-action lawsuit arguing that the state’s Medicaid program is improperly denying Hepatitis C medication to members until they are severely ill. The suit names Kansas Department of Health and Environment (KDHE) Secretary Jeff Andersen and KDHE Division of Health Care Finance Director Jon Hamdorf. Medicaid managed care plans in the state either require “severe liver damage” before covering the drugs or allow some coverage before that point. If you have a Kansas Medicaid contract, on Feb. 18, 2018, Maximus instituted a compliance plan and announced that it is committed to reaching a June 1 deadline to deal with state concerns over the company’s processing of Medicaid applications. Maximus is required to reach certain performance standards or face fines and the potential loss of its contract. |
| Kentucky: | Kentucky expanded Medicaid, but with an approved section 1115 waiver. In January, Kentucky’s waiver was approved by the federal government to implement work requirements for Medicaid recipients. Implementation will start in April 2018, with full implementation by July 2018. The waiver was approved for five years, through Sept. 30, 2023. In state audit news, non-emergency medical transportation (NEMT) providers are on the chopping block. |
| Louisiana: | Louisiana expanded Medicaid, but now the state may remove 46,000 elderly and disabled individuals from Medicaid as part of a series of healthcare-related budget cuts proposed by Gov. John Bel Edwards for 2019. The proposal would cut $657 million in state healthcare funding and as much as $2.4 billion, including federal matching funds, in total. The proposal would also cut funding to safety net hospitals and eliminate mental health services for adults who don’t otherwise qualify for Medicaid. |
| Maine: | Maine expanded Medicaid. The state adopted the Medicaid expansion through a ballot initiative in November 2017; the measure required submission of the state plan amendment within 90 days and implementation of expansion within 180 days of the effective date. In Maine audit news, a behavioral healthcare provider accused of fraud has put behavioral healthcare providers on the front line. |
| Maryland: | Maryland expanded Medicaid. Maryland’s system of pushing hospitals to achieving lower admissions has added up to hundreds of millions of dollars in savings, a new report shows. Since 2014, the state caps hospitals’ revenue each year, letting them keep the difference if they reduce inpatient and outpatient treatment while maintaining care quality. Per capita hospital spending by all insurers has grown by less than 2 percent a year in Maryland, below the economic growth rate, defined four years ago as 3.58 percent annually, a key goal for the program. |
| Massachusetts: | Massachusetts expanded Medicaid. The state has begun to roll out new Accountable Care Organization (ACO) networks. Members assigned to an ACO have until May 31 to switch before they are locked in for nine months. The changes are expected to impact more than 800,000 Medicaid recipients and are designed to better manage patient care, reimburse providers based on quality, and address social determinants of health. There is expected confusion with this change among Medicaid patients and providers. |
| Michigan: | Michigan expanded Medicaid, but with an improved section 1115 waiver. On Feb. 18, 2018, Michigan announced that it would consider a proposal to transition the state’s $2.8 billion Medicaid nursing home and long-term care services programs into managed care. An initial review by the state Department of Health and Human Services is expected to begin by July 1. |
| Minnesota: | Minnesota expanded Medicaid. MN has a proposed Medicaid waiver bill, which requests permission from the federal government to implement an 80-hour-per-month requirement that would mandate Medicaid beneficiaries who are able-bodied adults and not the sole caretaker of a child to work, actively seek employment, participate in educational or training programs, or volunteer. |
| Mississippi: | Mississippi did not expand Medicaid. The five-year waiver request from Gov. Phil Bryant seeks to require nondisabled adults, including low-income parents and caretakers, to participate in at least 20 hours per week of “workforce training.” To be eligible, Medicaid beneficiaries must work, be self-employed, volunteer, or be in a drug treatment program, among other approved activities. If people don’t comply, they’ll be kicked off Medicaid. |
| Missouri: | Missouri did not expand Medicaid. The Missouri Hospital Association has won a lawsuit against the Centers for Medicare & Medicaid Services (CMS) over a rule that deducts Medicare and commercial insurance reimbursements from total disproportionate-share hospital (DSH) allotments. U.S. District Judge Brian Wimes ruled that the agency exceeded its authority. State hospitals would have had to pay back $96 million for 2011 and 2012 alone. Expect more scrutiny on hospitals in light of this decision. |
| Montana: | Montana expanded Medicaid, but with an approved 1115 waiver. Montana is one of many states that have proposed budget cuts to Medicaid. A new proposed rule, which would take effect April 1, would move the state’s addiction counseling from a needs-based system to a cap of 12 individual sessions. The rule may be retroactive, so expect audits to recoup if the rule passes. |
| Nebraska: | Nebraska did not expand Medicaid. On March 7, 2018, advocates for Medicaid expansion launched a petition drive, “Insure the Good Life,” to place the expansion issue on the November 2018 general election ballot. State lawmakers have rejected the expansion measure the past five legislative attempts. Nebraska has paid millions to the federal government in the past few years for noncompliance. Many think it will owe millions more. Audits on providers will increase in Nebraska to compensate for money paid to the federal government – in all service types. |
| Nevada: | Nevada did expand Medicaid. It paid the federal government roughly $4.1 million in 2017 to use HealthCare.gov. CMS also asked for 1.5 percent of the premium payments that were collected through its exchange last year, a percentage that will double in 2019. Nevada plans to cut its IT costs by replacing its use of HealthCare.gov with a new health insurance exchange in 2019. Pain management providers and pharmacies are the target of Medicaid audits here. |
| New Hampshire: | New Hampshire expanded Medicaid, but with an approved section 1115 waiver. On March 9, 2018, the New Hampshire Senate passed a bill to continue the state’s Medicaid expansion program. The legislation, which now heads to the House, would impose work requirements on members and utilize 5 percent of liquor revenues to cover the cost of expansion. The Senate voted to reauthorize the Medicaid program for five years and transition to managed care in 2019. The current expansion program, the New Hampshire Health Protection Program, covers about 50,000 individuals. |
| New Jersey: | New Jersey expanded Medicaid. On March 13, 2018, Gov. Phil Murphy delivered his first budget address, unveiling a $37.4 billion budget with a projected surplus of $743 million. 2019 revenues are projected to grow by 5.7 percent from last year. Among the healthcare provisions are: a) close to $4.4 billion in state funds to provide healthcare to almost 1.8 million residents through New Jersey’s Medicaid program, NJ FamilyCare; b) $8.5 million to implement autism spectrum disorder services for Medicaid-eligible children and teens to help 10,000+ families with behavioral and physical supports; c) $11 million in state and federal funds to expand family planning services under NJ FamilyCare to residents at or below 200 percent of the federal poverty level; d) $252 million to fund the hospital Charity Care program; and e) $100 million to fund addiction initiatives (list not exhaustive). |
| New Mexico: | New Mexico expanded Medicaid. The 15 behavioral healthcare providers that were put out of business in 2013 have filed lawsuits against the state. Speculation has it that after the election this year – likely taking Gov. Susana Martinez out of office – the providers may get compensated. New Mexico auditors are focused on the delivery of babies and services to the elderly. |
| New York: | New York expanded Medicaid. Recently, the state’s Assembly released its one-house budget bill. The plan restores $135 million in reductions to the Medicaid program. The big news in the Big Apple regarding Medicaid is in home health. The New York Court of Appeals, the state’s highest court, has agreed to hear a case regarding wages for home care workers. A state Appellate Court ruled in September 2017 that home care agencies must pay live-in home health aides for 24 hours per day, not the 13 hours that is the industry standard, assuming that they are allowed eight hours of sleep and three hours for meals. The New York Department of Labor has issued an emergency regulation that maintains the policy of allowing employers to pay home care workers for 13 hours of a 24-hour shift. If the decision stands, it means that agencies must pay for an additional 11 hours of care per day, almost doubling the cost of care. It is estimated that it will increase costs for home care in New York’s Medicaid program by tens of millions of dollars. Any of you who have home health care agencies in New York, which are dependent on Medicaid, beware that the reimbursement rates are not increasing to accommodate for the increased wages. Many home health companies will go out of business if the decision stands. |
| North Carolina: | North Carolina did not expand Medicaid. The state is seeking to transition its Medicaid program from a fee-for-service model to a managed care model for all services. The transition of beneficiaries with a serious mental illness, a serious emotional disturbance, a substance use disorder, or an intellectual/developmental disability (IDD) will be delayed until the launch of behavioral health and IDD tailored plans. The state estimates that 2.1 million individuals will be eligible for managed care. This is a huge overhaul of the Medicaid system. |
| North Dakota: | North Dakota expanded Medicaid. The state received substantial funds from a settlement designed to compensate states, in part, for the billions of dollars in healthcare costs associated with treating tobacco-related diseases under state Medicaid programs. To date, states have received more than $50 billion in settlement payments. North Dakota is also one of the “test” states to allow Medicare Advantage Value-Based Insurance Design to waive many requirements of federal regulation. |
| Ohio: | Ohio expanded Medicaid. On March 13, 2018, it was announced that the Ohio Pharmacists Association alleged that CVS Caremark overcharges Medicaid managed care plans for medications while often reimbursing pharmacists less than the cost of the drugs. CVS denied accusations of overcharging in an attempt to drive out retail competition and reported that there are strict firewalls between their retail business and their pharmacy benefit manager (PBM) business, CVS Caremark. Beginning in July, Medicaid MCOs will be required to report to state regulators how much PBMs are paying pharmacies. |
| Oklahoma: | Oklahoma did not expand Medicaid. On March 6, 2018, Gov. Mary Fallin issued an executive order to develop Medicaid work requirements. On March 13, 2018, the OK Senate approved legislation to tighten the income threshold for Medicaid eligibility among parents and caretakers to 20 percent of the federal poverty level, down from 40 percent under current state law. The move could impact nearly 44,000 of the 107,000 parents and caretakers on Medicaid in the state. The legislation now moves to the House. |
| Oregon: | Oregon expanded Medicaid. But how it will be funded makes state hospitals angry. Voters approved taxes on hospitals and health plans to continue to fund the state’s Medicaid expansion. The taxes, which were approved in a ballot measure, are expected to generate $210 million to $320 million over two years by imposing a 0.7 percent tax on some hospitals and a 1.5 percent tax on gross health insurance premiums and on managed care organizations. Unions and large, self-insured employers are exempt. |
| Pennsylvania: | Pennsylvania expanded Medicaid. On March 8, 2018, the state’s Department of Human Services discussed HB 59, a bill that would require able-bodied Medicaid recipients to prove they are looking for work. The bill was passed last year by the General Assembly, but vetoed by Gov. Wolf. Acting Human Services Secretary Teresa Miller said implementing the requirements would be expensive, estimating that the project could run up to $600 million in the first year. |
| Rhode Island: | Rhode Island expanded Medicaid. On Feb. 14, 2018, it was announced that the number of recently released inmates in Rhode Island who died from an opioid overdose decreased between 2016 and 2017. The study attributed the decrease to the availability of medication-assisted treatment in correctional facilities starting in 2016. Rhode Island was the first state to offer inmates methadone, buprenorphine, and naltrexone. |
| South Carolina: | South Carolina did not expand Medicaid. The state is overhauling its Medicaid Management Information System. Cognosante was awarded the contract, effective March 6, 2018 through March 5, 2023. |
| South Dakota: | South Dakota did not expand Medicaid. Furthermore, the state is seeking permission from the Trump administration to implement Medicaid work requirements, a move that would affect 4,500 beneficiaries. In South Dakota audit news, Program Integrity has ramped up the number of audits and prepayment reviews, especially on behavioral healthcare, dental care, hospital care, and home health. |
| Tennessee: | Tennessee did not expand Medicaid. In February, the Centers for Medicare & Medicaid Services approved a proposal to launch a two-year pilot designed to improve prescription drug adherence and effectiveness for Medicaid beneficiaries. As part of the pilot, pharmacists will work with Medicaid beneficiaries enrolled in patient-centered medical homes to ensure that medications are appropriate, safe, and taken as directed. As many as 300,000 enrollees may be affected by the pilot. This initiative will affect pharmacies based within hospitals. |
| Texas: | Texas did not expand Medicaid. The state’s Health and Human Services Commission (HHSC) announced contract awards for the state’s Children’s Health Insurance Program (CHIP) in rural areas. The six awardees are Blue Cross and Blue Shield of Texas (Central Region), Driscoll Children’s Health Plan (Hidalgo Region), Molina Healthcare of Texas, Inc. (Central, Hidalgo, Northeast, and West Regions), Superior Health Plan, Inc./Centene (West Region), and TX Children’s Health Plan, Inc. (Northeast Region). Contracts are slated to begin on Sept. 1, 2018. This is a big change to Texas Medicaid. |
| Utah: | Utah did not expand Medicaid. On March 9, 2018, Utah legislators passed a limited Medicaid expansion bill. The legislation would cover approximately 70,000 individuals who earn under 100 percent of the federal poverty level and impose a work requirement and spending cap for enrollees. |
| Vermont: | Vermont expanded Medicaid. One hospital here recently paid $1.6 million to resolve allegations that it violated the False Claims Act (FCA). According to the government, between January 2012 and September 2014, Brattleboro Memorial knowingly submitted a number of outpatient laboratory claims that lacked proper documentation. On another note, Vermont only has 188 beds in its mental health system, and patients are placed on waiting lists or forced to rely on hospital ERs. This is an ongoing problem for patients and hospitals. |
| Virginia: | Virginia did not expand Medicaid. On March 2, 2018, Gov. Ralph Northam told state budget legislators to include Medicaid expansion spending plans or he would add the expansion as a budget amendment. In state audit news, Program Integrity’s spotlight is shining on long-term care facilities, durable medical equipment, transportation, and hospitals. |
| Washington: | Washington expanded Medicaid. On Feb. 20, 2018, the state announced that it approved all nine Accountable Communities of Health (ACH) Medicaid Transformation Project Plans. The Medicaid Transformation Project is the state’s Section 1115 waiver, approved by the Centers for Medicare & Medicaid Services (CMS) in 2017. Under the waiver, the first initiative involves transforming Medicaid delivery in each regional service area through ACHs. The newly approved project plans will look to improve the overall health of Medicaid beneficiaries by tackling the opioid crisis and integrating behavioral health, among other aims. |
| West Virginia: | West Virginia expanded Medicaid. On March 6, 2018, it was announced that Medicaid funding could be at risk after Gov. James Justice signed a bill increasing state workers’ and teachers’ pay by 5 percent following a statewide teachers’ strike. According to West Virginia Senate Finance Chairman Craig Blair, the pay raises could be funded through cuts to Medicaid, among other areas; however, the Governor stated that the Medicaid budget would not be cut. The strike was in response to low pay and rising health insurance costs. The raises are expected to cost the state treasury approximately $110 million a year. |
| Wisconsin: | Wisconsin did not expand Medicaid. The state covers adults up to 100 percent of the federal poverty line in Medicaid, but it did not adopt the Patient Protection and Affordable Care Act (PPACA) expansion. Still, managed care will soon be mandatory. The state’s Department of Health Services reported that through June 2018, it will roll out mandatory enrollment for many Supplemental Security Income (SSI) beneficiaries in Medicaid managed care. Approximately 28,000 beneficiaries may be impacted. The change impacts members who live an SSI managed care service area, are age 19 or older, and have a Medicaid SSI or SSI-related disability. Previously, SSI beneficiaries could opt out of managed care after two months. Up to two-thirds of eligible beneficiaries typically opt out of managed care. |
| Wyoming: | Wyoming did not expand Medicaid. A bill that would have required able-bodied Medicaid recipients in Wyoming to work at a job, go to school, or do volunteer work died this month in a House committee. The state’s Department of Health is partnering with Medicity to develop a new health information exchange for the state. The Wyoming Frontier Information Exchange will be a centralized repository of clinical data for participating patients, powered in part by Medicity’s data aggregation and interoperability technology. |
Legislative Update For May 10, 2017
I am a member of the Health Law Section’s Legislative Committee, along with attorneys Shawn Parker, and Scott Templeton. Together we drafted summaries of all the potential House and Senate Bills that have passed one house (crossed over) and have potential of becoming laws. We published it on the NC Bar Association Blog. I figured my readers would benefit from the Bill summaries as well. Please see below blog.
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On behalf of the North Carolina Bar Association Health Law Section’s Legislative Committee, we are providing the following 2017 post-crossover legislative update.
The North Carolina General Assembly has been considering a substantial number of bills of potential relevance to health law practitioners this session. The Health Law Section’s Legislative Committee, with the help of NCBA staff, has been monitoring these bills on virtually a daily basis.
The General Assembly’s rules provide for a “crossover date” during the legislative session, which this year was April 27. The importance of that date is essentially that, with certain caveats, unless a bill has passed one chamber (House or Senate) by the crossover date, the bill will no longer be considered by the legislature. The following listing provides brief descriptions of current proposed legislation, in two categories.
The first category includes bills that passed either the House or Senate by the crossover date, and therefore remain in consideration by the legislature. The second category includes bills that did not pass either chamber before the crossover date, but because the bills contain an appropriation or fee provisions, they may continue to be considered pursuant to legislative rules.
In addition to the bills listed below, a number of bills did not make crossover and do not meet an exception to the crossover rule, and are likely “dead” for this legislative session. We recognize, however, that the legislature is capable of “reviving” legislation by various mechanisms. The Legislative Committee continues to monitor legislation during the session, and in addition to this update, we may provide further updates as appropriate, and also anticipate doing a final summary once the legislature has adjourned later this year.
Bills That Passed One Chamber by the Crossover Date.
House Bills
HB 57: Enact Physical Therapy Licensure Compact
Makes North Carolina a member of the Physical Therapy Licensure Compact, upon the 10th member state to enact the compact. Membership in the compact would allow physical therapists who hold licenses in good standing in any other compact state to practice physical therapy in North Carolina. Likewise, physical therapists holding a valid license in North Carolina would be able to practice physical therapy in any of other the compact member states.
HB 140: Dental Plans Provider Contracts/Transparency
Provides that insurance companies that offer stand-alone dental insurance are subject to the disclosure and notification provisions of G.S. 58-3-227.
HB 156: Eyeglasses Exemption from Medicaid Capitation
Adds the fabrication of eyeglasses to the list of services that are not included as part of transitioning the State Medicaid program to a capitated system.
HB 199: Establish Standards for Surgical Technology
Creates standards for surgical technology care in hospitals and ambulatory surgical facilities, specifically prohibiting employing or contracting with a surgical technologist unless that technologist produces one of four enumerated qualifications.
HB 206: N.C. Cancer Treatment Fairness
Requires insurance coverage parity so orally administered anti-cancer drugs are covered on a basis no less favorable than intravenously administered or injected anti-cancer drugs.
HB 208 : Occupational Therapy Choice of Provider
Adds licensed occupational therapists to the list of providers for whom insurers are required to pay for services rendered, regardless of limitations to access of such providers within the insurance contract.
HB 243: Strengthen Opioid Misuse Prevention (STOP) Act
Requires, among other things, practitioners to review information in the state-controlled substance reporting system prior to prescribing certain targeted controlled substance and limits the length of supply that a targeted controlled substance may be prescribed for acute pain relief.
HB 258: Amend Medical Malpractice Health Care Provider Definition
Includes paramedics, as defined in G.S. 131E-155, within the definition of health care provider for the purposes of medical malpractice actions.
HB 283: Telehealth Fairness Act
Requires health benefit plans to provide coverage for health care services that are provided via telemedicine as if the service were provided in person.
HB 307: Board Certified Behavioral Analyst/Autism Coverage
Adds board certified behavioral analysts as professionals that qualify for reimbursement for providing adaptive behavioral treatments under North Carolina’s mandatory coverage requirements for autism spectrum disorder.
HB 403: LME/MCO Claims Reporting/Mental Health Amendments
Requires Local Management Entities/Managed Care Organizations (LME/MCOs) to use a state-designated standardized format for submitting encounter data, clarifies that the data submitted may be used by DHHS to, among other authorized purposes, set capitation rates. Also modifies multiple statutory requirements and references related to LME/MCOs. Limits the LME/MCOs’ use of funds to their functions and responsibilities under Chapter 122C. Also limits the salary of an area director unless certain criteria are met.
HB 425: Improve Utilization of MH Professionals
Allows licensed clinical addiction specialists to own or have ownership interest in a North Carolina professional corporation that provides psychotherapeutic services. Allows licensed professional counselors or licensed marriage and family therapist to conduct initial examinations for involuntary commitment process when requested by the LME and approved by DHHS.
HB 550: Establish New Nurse Licensure Compact
Repeals the current nurse licensure compact codified at G.S. 90-171.80 – 171.94 and codifies a substantially similar compact, which North Carolina will join upon adoption by the 26th state, allowing nurses to have one multi-state license, with the ability to practice in both their home state and other compact states.
HB 631: Reduce Admin. Duplication MH/DD/SAS Providers
Directs DHHS to establish a work group to examine and make recommendations to eliminate administrative duplication of requirements affecting healthcare providers.
Senate Bills
SB 42: Reduce Cost and Regulatory Burden/Hospital Construction
Directs the N.C. Medical Care Commission to adopt the American Society of Healthcare Engineers Facility Guidelines for physical plant and construction requirements for hospital facilities and to repeal the current set of rules pertaining to such requirements under the current hospital facilities rules within the North Carolina Administrative Code.
SB 161: Conforming Changes LME/MCO Grievances/Appeals
Provides a technical change to North Carolina LME/MCO enrollee grievance statutes by renaming “managed care actions” as “adverse benefit determinations” to conform to changes in federal law.
SB 368: Notice of Medicaid SPA Submissions
Directs DHHS to notify the General Assembly when DHHS submits to the federal government an amendment to the Medicaid State Plan, or decides not to submit a previously published amendment.
SB 383: Behavioral Health Crisis EMS Transport
Directs DHHS to develop a plan for adding Medicaid coverage for ambulance transports to behavioral health clinics under Medicaid Clinical Coverage Policy 15.
SB 384: The Pharmacy Patient Fair Practices Act
Prohibits pharmacy benefits managers from using contract terms to prevent pharmacies from providing direct delivery services and allows pharmacists to discuss lower-cost alternative drugs with and sell lower-cost alternative drugs to its customers.
SB 630: Revise IVC Laws to Improve Behavioral Health
Makes substantial revisions to Chapter 122C regarding involuntary commitment laws.
Bills That Did Not Pass Either Chamber by the Crossover Date, But Appear to Remain Eligible for Consideration.
House Bills
HB 88: Modernize Nursing Practice Act
Eliminates the requirement of physician supervision for nurse practitioners, certified nurse midwives, clinical nurse specialists and certified registered nurse anesthetists.
HB 185: Legalize Medical Marijuana
Creates the North Carolina Medical Cannabis Act. Among many other provisions, it provides that physicians would not be subject to arrest, prosecution or penalty for recommending the medical use of cannabis or providing written certification for the medical use of cannabis pursuant to the provision of the newly created article.
HB 270: The Haley Hayes Newborn Screening Bill
Directs additional screening tests to detect Pompe disease, Mucopolysaccharidosis Type I, and X-linked Adrenoleukodystrophy as part of the state’s mandatory newborn screening program.
HB 858: Medicaid Expansion/Healthcare Jobs Initiatives
Repeals the legislative restriction on expanding the state’s Medicaid eligibility and directs DHHS to provide Medicaid coverage to all people under age 65 with incomes equal to or less than 133 percent of the federal poverty guidelines. Appropriates funds and directs the reduction of certain recurring funds to implement the act. Additionally the bill creates and imposes an assessment on each hospital that is not fully exempt from both the current equity and upper payment limit assessments imposed by state law.
HB 887: Health Insurance Mandates Study/Funds
Appropriates $200,000 to fund consultant services to assist the newly established Legislative Research Commission committee on state mandatory health insurance coverage requirements.
HB 902: Enhance Patient Safety in Radiological Imaging.
Creates a new occupational licensure board to regulate the practice of radiologic imaging and radiation therapy procedures by Radiologic Technologists and Radiation Therapists.
Senate Bills
SB 73: Modernize Nursing Practice Act
Eliminates the requirement of physician supervision for nurse practitioners, certified nurse midwives, clinical nurse specialists and certified registered nurse anesthetists.
SB 290: Medicaid Expansion/Healthcare Jobs Initiative
Repeals the legislative restriction on expanding the state’s Medicaid eligibility and directs DHHS to provide Medicaid coverage to all people under age 65 with incomes equal to or less than 133 percent of the federal poverty guidelines. Appropriates funds, directs the reduction of certain recurring funds to implement the Act. Additionally the bill creates and imposes an assessment on each hospital that is not fully exempt from both the current equity and upper payment limit assessments imposed state law.
SB 579: The Catherine A. Zanga Medical Marijuana Bill
Creates the North Carolina Medical Cannabis Act. Among many other provisions, it provides that physicians would not be subject to arrest, prosecution or penalty for recommending the medical use of cannabis or providing written certification for the medical use of cannabis pursuant to the provision of the newly created article.
SB 648: Legalize Medical Marijuana
Creates the North Carolina Medical Cannabis Act. Among many other provisions, it provides that physicians would not be subject to arrest, prosecution or penalty for recommending the medical use of cannabis or providing written certification for the medical use of cannabis pursuant to the provision of the newly created article.
Please contact a member of the Health Law Section’s Legislative Committee should you have any questions regarding this report. The Committee’s members are Knicole Emanuel, Shawn Parker, and Scott Templeton (chair).
Trump-caid: Medicaid Under the AHCA
It is still unclear whether the American Health Care Act (AHCA), or H.R. 1628, will be signed into law. On March 6, 2017, the House Energy & Commerce Committee (E&C) and Ways & Means Committee (W&M) officially released the draft bill. The latest action was on April 6, 2017, H.Res.254 — 115th Congress (2017-2018) was placed on the House calendar. The rule provides for further consideration of H.R. 1628. The rule also provides that the further amendment printed Rules Committee Report 115-88 shall be considered as adopted.
So what exactly would AHCA change in relation to Medicaid?
For over fifty (50) years, states have created and implemented Medicaid programs entirely dependent on federal contributions. Medicaid is based on federal law. Although each individual state may have slight variances in the Medicaid program, because the state Medicaid programs must follow federal law, the state Medicaid programs are surprisingly similar. An example of a slight variance is that some Medicaid services are voluntary, like personal care services (PCS); some states offer PCS paid by Medicaid and others do not.
Currently, the federal government does not cap the federal contribution. However much a state spends – no matter how exorbitant – the federal government will match (at whatever percentage allotted for that state). For example, the federal government pays 66.2% of North Carolina’s Medicaid spending. Which means, BTW, that $264,800.00 of Cardinal’s CEO’s salary is funded by the federal government. These percentages are called Federal Medical Assistance Percentages (FMAP).
All this may change under the American Health Care Act (AHCA), or H.R. 1628, as approved by the House Ways and Means, Energy and Commerce, Budget, and Rules Committees.
The AHCA proposes many changes from the Affordable Care Act (ACA) germane to Medicaid. In my humble opinion, some of the replacements are stellar; others are not. No one (sane and logical) could argue that the ACA was perfect legislation for providers, employers, or recipients. It was not. It mandated that employers pay for health care insurance for their employees, which caused the number of part-time workers to explode. The ACA mandated the states to suspend Medicaid reimbursements upon a credible allegation of fraud, which, basically, could be a disgruntled employee lying with an anonymous accusation. This provision put many providers out of business without due process (Remember New Mexico?). The ACA also put levers in place that meant younger policyholders were subsidizing older ones. Healthy, young adults were paying for older adults. The ACA reduced payments for Medicare Advantage plans, hospitals, and other providers to save money. There was also a provider shortage due to the low reimbursement rates and regulatory audits. The Affordable Care Act was anything but affordable. At least the American Health Care Act does not protest itself to be affordable.
Here are some of the most poignant “repeal and replace” items in Trump-caid:
1. Health Savings Accounts
The AHCA will encourage the use of Health Savings Accounts by increasing annual tax free contribution limits. It will also modify ACA premium tax credits for 2018-2019 to increase the amount for younger adults and to reduce the amount for older adults. In 2020, the AHCA will replace ACA income-based tax credits with flat tax credits adjusted for age. Eligibility for new tax credits phases out at income levels between $75,000 and $115,000.
2. Cap on federal contributions
Beginning in 2020, the AHCA would cap federal contributions to state Medicaid programs. This will result in huge federal savings, but cause severe shortages on the state level. The federal per-enrollee caps would be based on states’ Medicaid expenditures in 2016, trended forward to 2019. A uniform, federal capped system would provide fiscal security for the federal government and shift the risk of over spending on the states.
The following categories would be exempt from the per-capita allotments (i.e. paid for outside of the per-capita caps): DSH payments, administrative payments, individuals covered under CHIP Medicaid expansion program or who receive medical assistance from an IHS facility, breast and cervical cancer patients, and partial benefit-enrollees
With the risk on the states, there is a high probability that optional Medicaid services, such as PCS, may be cut from the budget. If PCS were eliminated, more patients would enter long-term care facilities and fewer patients would be able to remain in their homes. The House bill essentially eliminates the enhanced funding levels that made possible states’ expansion of Medicaid to their poorest working-age adult residents. In all, 31 states expanded Medicaid under the ACA. While the House Bill does not prohibit Medicaid expansion; expansion will be difficult to remain funded by the states.
3. Presumptive eligibility program
The House bill would end the ACA’s special hospital presumptive eligibility program, under which hospitals can temporarily enroll patients who “appear” to be eligible and begin to get paid for their care while their full applications are pending. (What in the world does “appear to be eligible” mean. Is it similar to profiling?)
4. Home equity and eligibility
Under current law, states disregard the value of a home when determining Medicaid eligibility for an individual in need of long-term community-supported care. The bill would take away this state flexibility, capping the equity value at $500,000.
5. Disproportionate Share Hospital Payments
The AHCA would repeal the Medicaid DSH reductions set in motion by the ACA in 2018 for non-expansion States, and 2020 for expansion states.
6. Section 1115 Waivers
States with Waivers will not be penalized for having a Waiver. In other words, the expenses and payments under the Waiver will be treated in the same manner as if the state did not have a Waiver. However, if a state’s waiver contains payment limitations, the limitations in the new law, not the Waiver, apply.
Again, the future of the AHCA is uncertain. We all remain watchful. One change that I would like to see is that due process is afforded to providers prior to suspension of all funds when there is a credible allegation of fraud.
Health Care Integration: A Glimpse Into My Crystal Ball
Throughout the history of health care, payors and payees of Medicare/caid have existed in separate silos. In fact, the two have combated – the relationship has not always been stellar.
Looking into my crystal ball; however, all will not be as it is now [that’s clear as mud!].
Now, and in the upcoming years, there will be a massive shift to integrate payors and payees under the same roof. Competition drives this movement. So does the uncertainty in the health care market. This means that under one umbrella may be the providers and the paying entities.
Why is this a concern? First – Any healthcare entity that submits claims to the federal government, whether it be a provider or payor, must comply with the fraud and abuse statutes. As such, there is a potential to run afoul of federal and state regulations regulating the business of health care. Payors know their rules; providers know their rules…And those rules are dissimilar; and, at times, conflicting. The opportunity to screw up is endemic.
Second – With the new responsibilities mandated by the Yates Memo, these new relationships could create awkward situations in which the head of the payor department could have knowledge (or should have knowledge) of an [alleged] overpayment, but because of the politics at the company or self-interest in the preservation of his or her career, the head may not want to disclose such overpayment. With the 60-day rule, the head’s hesitation could cost the company.
Let’s investigate:
The Affordable Care Act (ACA) reinvented health care in so many ways. Remember, the ACA is supposed to be self-funding. Taxes were not to increase due to its inception. Instead, health care providers fund the ACA through post payment and prepayment audits, ZPIC audits, CERTs, MFCU, MICs, RACs, and PERMs.
The ACA also made a whole new commercially-insured population subject to the False Claims Act. False statements are now being investigated in connection with Medical Loss Ratios, justifications for rate increases, risk corridor calculations, or risk adjustment submissions.
CMS imposes a duty to detect fraud, waste, and abuse (FWA). But what if you’re looking at your own partners?
The chart above depicts “old school” Medicare payment options for physicians and other health care providers. In our Brave New World, the arrows will be criss-crossed (applesauce), because when the payors and the payees merge, the reimbursements, the billing, and the regulatory supervision will be underneath the same roof. It’ll be the game of “chicken” taken to a whole new level…with prison and financial penalties for the loser.
Since 2011, kickback issues have exponentially grown. The Anti-Kickback Statute makes it a criminal offense for a provider to give “remuneration” to a physician in order to compensate the physician for past referrals or to induce future referrals of patients to the provider for items or services that are reimbursed, in whole or in part, by Medicare or Medicaid.
Imagine when payors and payees are owned by the same entity! Plus, the ACA amended the kickback statutes to eliminate the prong requiring actual knowledge or intent. Now you can be convicted of anti kickback issues without any actual knowledge it was ever occurring!!
Now we have the “one purpose test,” which holds that a payment or offer of remuneration violates the Anti-Kickback Statute so long as part of the purpose of a payment to a physician or other referral source by a provider or supplier is an inducement for past or future referrals. United States v. Borrasi, 2011 WL 1663373 (7th Cir. May 4, 2011).
There are statutory exceptions. But these exceptions differ depending on whether you are a payor or payee – see the potential criss-cross applesauce?
And, BTW, which types of health care services are bound by the anti kickback statutes?
- Clinical laboratory services;
- Physical therapy services;
- Occupation therapy services;
- Radiology services (including MRIs, Ultrasounds, and CAT scans);
- Radiation therapy and supplies;
- Durable medical equipment and supplies;
- Parenteral and enteral nutrients, equipment, and supplies;
- Prosthetics, orthotics, and prosthetic devices and supplies;
- Home health services;
- Outpatient prescription drugs; and
- Inpatient and outpatient hospital services.
Imagine a building. Inside is a primary care physician (PCP), a pediatrician, a home health agency, and a psychiatrist. Can the PCP refer to the home health agency? Can a hospital refer to a home care agency? What if one of the Board of Directors sit on both entities?
The keys to avoiding the anti kickback pitfalls is threefold: (1) fair market value (FMV); (2) arm’s length transactions; and (3) money cannot be germane to referrals.
However, there is no one acceptable way to determine FMV. Hire an objective appraiser. While hiring an objective appraiser does not establish accuracy, it can demonstrate a good faith attempt.
Number One Rule for Merging/Acquiring/Creating New Partnerships in our new Brave New World of health care?
Your attorney should be your new BFF!! (Unless she already is).
The Yates Memo: It May Be the Second Coming for Individual Executives
The Yates memo? Sadly, we aren’t talking about William Butler Yates, who is one of my favorite poets:
TURNING and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.
Surely some revelation is at hand;
Surely the Second Coming is at hand…Part of The Second Coming
Ok, so maybe it is a little melodramatic to compare the Yates memo from the Office of the Deputy Attorney General to the end of the world, the drowning of innocence, and The Second Coming, but I made analogies in past blogs that had stretched and, dare I say, hyberbolized the situation.
What is the Yates memo?
The Yates memo is a memorandum written by Sally Quillian Yates, Deputy Attorney General for the U.S. Dept. of Justice, dated September 9, 2015.
It basically outlines how federal investigations for corporate fraud or misconduct should be conducted and what will be expected from the corporation getting investigated. It was not written specifically about health care providers; it is a general memo outlining the investigations of corporate wrongdoing across the board. But it is germane to health care providers.
By far the most scary and daunting item discussed within the Yates memo is the DOJ’s interest in indicting individuals within corporations as well as the corporate entities itself, i.e., the executives…the management. Individual accountability.
No more Lehman Brothers fallout with former CEO Dick Fuld leaving the catastrophe with a mansion in Greenwich, Conn., a 40+ acre ranch in Sun Valley, Idaho, as well as a five-bedroom home in Jupiter Island, Fla. Fuld may have or may not have been a player in the downfall of Lehman Brothers. But the Yates Memo was not published back in 2008.
The Yates Memo outlines 6 steps to strengthen audits for corporate compliance:
- To be eligible for any cooperation credit, corporations must provide to the DOJ all relevant facts about individuals involved in corporate misconduct.
- Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation.
- Criminal and civil attorneys handling corporate investigations should be in routine communication with one another.
- Absent extraordinary circumstances, no corporate resolution will provide protection from criminal or civil liability for any individuals.
- Corporate cases should not be resolved without a clear plan to resolve related individual cases before the statute of limitations expires and declinations as to individuals in such cases must be memorialized.
- Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay.
So why write about now – over 6 months after it was disseminated?
First, since its dissemination, a few points have been clarified that were otherwise in question.
About a month after its publication, U.S. Assistant Attorney General Leslie Caldwell emphasized the Yates memo’s requirement that corporations must disclose all relevant facts regarding misconduct to receive cooperation credit. Caldwell went so far to say that companies must affirmatively seek relevant facts regarding misconduct.
For example, Hospital X is accused of Medicare fraud, waste, and abuse (FWA) in the amount of $15 million. The Yates memo dictates that management at the hospital proactively investigate the allegations and report its findings to the federal government. The memo mandates that the hospital “show all its cards” and turn itself in prior to making any defense.
The problem here is that FWA is such a subjective determination.
What if a hospital bills Medicare for inplantable cardioverter defibrillator, or ICD, for patients that had coronary bypass surgery or angioplasty within 90 days or a heart attack within 40 days? What if the heart attack was never documented? What if the heart attack was so minor that it lasted under 100 milliseconds?
The Medicare National Coverage Determinations are so esoteric that your average Medicare auditor could very well cite a hospital for billing for an ICD even when the patient’s heart attack lasted under 100 milliseconds.
Yet, according to the Yates memo, the hospital is required to present all relevant facts before any defense. What if the hospital’s billing person is over zealous in detecting mis-billings? The hospital could very well have a legal defense as to why the alleged mis-billing is actually compliant. What about a company’s right to seek counsel and defend itself? The Yates memo may require the company to turn over attorney-client privilege.
The second point that has been clarified since the Yates’ memo’s publication came from Yates herself.
Yates remarks that there will be a presumption that the company has access to identify culpable individuals unless they can make an affirmative showing that the company does not have access to it or are legally prohibited from producing it.
Why should this matter? It’s only a memo, right?
Since its publication, the DOJ codified it into the revised U.S. Attorneys’ Manual, including the two clarifying remarks. Since its inception, the heads of companies have been targeted.
A case was brought against David Bostwick, the founder, owner and chief executive officer of Bostwick Laboratories for allegedly provided incentives to treating physicians in exchange for referrals of patients who would then be subjected to these tests.
When the pharmaceutical company Warner Chilcott was investigated for health care fraud prosecutors also went after W. Carl Reichel, the former president, for his alleged involvement in the company’s kickback scheme.
Prior to the Yates’ memo, it was uncommon for health care fraud investigations to involve criminal charges or civil resolutions against individual executives.
The Second Coming?
It may feel that way to executives of health care companies accused of fraud, waste, and abuse.
The False Claims Act: Are You Just Shaking a Magic 8 Ball?
Often we read in the news stories of hospitals or health care providers paying inordinate amounts to settle cases in which credible allegations of fraud or allegations of false claims preside. Many times the providers actually committed fraud, waste, or abuse. Maybe medical records were falsified, or maybe the documents were created for Medicaid/care recipients that do not exist. Maybe the services claimed to have been rendered were not. In these cases, the provider can be held liable criminally (fraud) and/or civilly (false claims). And these providers should be held accountable to the government and the taxpayers.
It appears that this is not the case for an Ohio hospital that settled a False Claims Act case for $4.1 million last month. Do not get me wrong: The False Claims Act is no joke. Possible penalties imposed by the False Claims Act can be up to $10,000 per claim “plus 3 times the amount of damages which the Government sustains because of the act of that person.” 37 USC §3729. See blog for more explanation.
In the Ohio hospital’s case, the penalty derived from Dr. Abubakar Atiq Durrani, a spinal surgeon, performing spinal surgeries that, allegedly, were not medically necessary.
According to what I’ve read, there is no question that Dr. Durrani actually performed these surgeries. He did. On actual people who exist. Instead, the allegation is that the surgeries were not medically necessary.
I have blogged about medical necessity in the past. Medical necessity is a subjective standard. Medical necessity is defined as reasonable, necessary, and/or appropriate, based on evidence-based clinical standards of care.
But it is still a subjective standard. When you receive news that you suffer from a debilitating disease, what do you do? You get a second opinion. If one doctor recommends brain surgery, what do you do? You get a second opinion.
After that, you grab a handy, dandy Magic 8 Ball and give it a shake. Kidding. Kinda.
My point is that 2 physicians can recommend two different courses of treatment. One physician may practice more defensive medicine, while another may be more cautious. Surgeons will, generally, recommend surgery, more than non-surgeons; it’s what they do.
Going back to Dr. Durrani, who was arrested in 2013 for allegedly “convinc[ing] [patients] they needed spine and neck surgery. However, other doctors later determined those surgeries as unnecessary and damaging to the patient’s health.”
I find two points striking about this case: (1) The allegation that this physician “convinced” people to undergo spine surgery; and (2) The fact that the hospital settled for $4.1 million when no fraud existed or was alleged, only questions as to medical necessity, which is subjective.
As to the first, I am imagining my doctor. I am imagining that I have horrible, chronic back pain. My doctor recommends spinal surgery. There is no way, at all, ever, in this universe, that any doctor would be able to convince me to undergo surgery if I did not want surgery. Period. Who allows themselves to be peer pressured into surgery? Not to knock on my own profession, but I have a sneaky suspicion that this allegation was concocted by the plaintiffs’ attorney(s) and the plaintiffs responded, “Oh, you are right. I was persuaded.”
As to the second…Why did the hospital settle for such a high amount? Couldn’t the hospital have gone to trial and convinced a jury that Dr. Durrani’s surgeries were, in fact, reasonable and/or appropriate, based on evidence-based clinical standards of care?
According to the Magic 8 Ball, “signs point to yes.” Why cave at such a large number where no fraud was alleged?
Whatever happened to Dr. Durrani because of this whole mess? “Following his arraignment, Durrani allegedly fled the United States and remains a fugitive.”
In sum, based on allegations of questionable medical necessity, not fraud, a hospital paid $4.1 million and a U.S. physician fled into hiding…allegedly.
I question this outcome. I even question whether these types of allegations fall within the False Claims Act.
The False Claims Act holds providers liable for (abridged version):
- knowingly presenting a fraudulent claim to the Government;
- knowingly making a fraudulent record or statement to the Government;
- conspiring to do any of the referenced bullet points;
- having possession of Government money and knowingly delivering less than the amount;
- delivering a certified document intending to defraud the Government without completely knowing whether the information was true;
- knowingly buying or receiving as a pledge of debt, public property from the an employee of the Government who does not have the right to pledge that property;
- knowingly making, using, or causing to be made or used, a false record material to an obligation to pay the Government, or knowingly concealing or decreasing an obligation to pay the Government.
I see nothing in the False Claims Act punishing a provider for rendering services that, perhaps, may not be medically necessary.
I actually find questions of medical necessity to be easily defensible. After all, who do we look to for determinations of what are reasonable and/or appropriate services, based on evidence-based clinical standards of care?
Our physicians.
Sure, some physicians may have conflicting views as to what is medically necessary. I see it all the time in court. One expert witness physician testifies that the service was medically necessary and another, equally as qualified, physician testifies to the contrary.
Unless I’m missing something (here, folks, is my “CYA”), I just do not understand why allegations of questionable medical necessity caused an U.S. physician to become a fugitive and a hospital to settle for $4.1 million.
It’s as if the hospital shook the Magic 8 Ball and asked whether it would be able to defend itself and received:
CMS Proposes Mandatory Bundled Medicare Reimbursements: Financial Risk on Hospitals!
A new CMS proposal could transform durable medical equipment (DME) Medicare reimbursements to hospitals. The proposal, if adopted, would implement a mandatory bundled Medicare reimbursement for hip and knee replacements or lower extremity joint replacements (LEJRs).
CMS has proposed this change to be piloted in 75 metropolitan areas prior to being implemented nationwide.
This mandatory bundled Medicare reimbursement will be unprecedented, as, thus far, CMS has only implemented voluntary bundled reimbursement rates. However, CMS has stated that its goal is to have at least 50% of all Medicare fee-for-service reimbursement to be paid under an alternative payment model by 2018, and, in order to meet this objective, CMS will need to implement more mandatory alternative payment models.
Another first is that CMS proposes that hospitals bear the brunt of the financial risk. To date, CMS has not targeted a type of health care provider as being a Guinea pig for new ideas, unlike the other proposed and implemented Bundled Payments for Care Improvement (BPCI) initiative where there are many types of providers that can participate and bear risks.
Will this affect NC hospitals?
Yes.
Of the 75 metropolitan areas chosen as “test sites” for the new bundled payment plan, 3 are located in NC.
1. Asheville
2. Charlotte
3. Durham-Chapel Hill
Apparently, CMS believes that Durham and Chapel Hill are one city, but you got to give it to them…by hyphenating Durham and Chapel Hill, CMS gets both Duke and UNC health systems to participate in the mandatory trial. Other large metro areas included in the trial are Los Angeles, New York City, and Miami.
LEJRs are the most frequent surgeries in the Medicare population. The average Medicare expenditures for LEJRs, including surgery, hospitalization, and recovery, can range from $16,500 to $33,000.
The mandatory bundled reimbursement will become effective January 2, 2016; however, the hospitals will not carry the financial risk until January 1, 2017. So, hospitals, you got a year and a half to figure it out!!
What exactly will this bundled reimbursement rate include?
Answer: Everything from an inpatient admission billed under MS DRG 469 or 470 until 90 days following discharge.
And we are talking about everything.
Thus, you will be reimbursed per “Episode of Care,” which includes:
“All related items and services paid under Medicare Part A and Part B for all Medicare fee-for-service beneficiaries, including physicians’ services, inpatient hospital service, readmissions (subject to limited exceptions), skilled nursing facility services, durable medical equipment, and Part B drugs.”
What should you do if you are a hospital so graciously selected to participate?
1. Assess your protocol as to discharging patients. Where do your patients go after being discharged?
2. Determine whether you want to partner with any critical care facilities, skilled nursing agencies, or home health agencies.
3. Assess your current reimbursement rates and analyze what current delivery patterns must be revamped in order to maintain profitability.
4. Determine future care management and clinical reprogram needs.
5. Analyze ways to provide more efficient delivery components.
6. Communicate with your DME vendors. Discuss ways to decrease spending and increase efficiency.
7. Plan all ways in which you will follow the patient after discharge through the 90 day period.
8. Consult your attorney.
If you would like to comment on the proposed rule, you have until September 8, 2015 at 5:00pm.
AZ Supreme Court Holds AZ Legislators Have Standing to Challenge AZ Law, But Media Mischaracterizing the Lawsuit
You know the old adage, “Believe none of what you hear, and only half of what you see?” –Benjamin Franklin.
Well the old adage still holds true, especially when it comes to journalists and the media interpreting and reporting on lawsuits that deal with Medicaid laws, and which, perhaps, only an infinitesimal, ancillary aspect may touch the issue of Medicaid expansion.
Even if the lawsuit will not impact Medicaid expansion, journalists and the media hype the lawsuits as “conservatives challenging Obamacare yet again,” which mischaracterizes the actual lawsuit.
It seems that the media have become so accustomed to polarizing the topic of Medicaid expansion that reporters seem incapable of truly assessing the issues objectively and reporting accordingly. This has happened recently when the AZ Supreme Court rendered a decision December 31, 2014, regarding legal standing, not the constitutionality of Medicaid expansion as many journalists report. Biggs, et al. v. Hon. Cooper, et al.
The Arizona Supreme Court only decided that 36 legislators have the legal standing to challenge the passage of House Bill 2010, which was signed into law as A.R.S. § 36-2901.08.
What is A.R.S. § 36-2901.08?
For starters, A.R.S. stands for Arizona Revised Statutes (ARS). For those of you who missed “Schoolhouse Rock” as a child, a statute is a law that is enacted by the legislative body and which governs the state. Statutes are considered “black letter law” and should be interpreted on their face value and plain meaning.
The content of 36-2901.08 allows the State of Arizona to expand Medicaid. In addition to expanding Medicaid, 35-2901.08 assesses a levy on hospitals to aid in funding the expansion of Medicaid.
36 Arizona legislators voted against 36-2901.08. It passed by a simple majority and was signed into law. The 36 legislators, who voted against the bill, brought a lawsuit to enjoin the statute from being applied or enacted. The State of Arizona’s position is that the 36 legislators lack the legal standing to bring the lawsuit.
Here are the issues in the legislators’ case, BIGGS ET AL. v. HON. COOPER ET AL.:
1. Do the 36 legislators have the standing to bring an injunctive action enjoining Arizona from carrying out 36-2901.08?
2. If the answer to #1 is yes, then have the 36 legislators proven that 36-2901.08 was passed in violation of the AZ Constitution?
I’ve read a number of articles from journalists covering this matter who mischaracterize the Biggs lawsuit as a lawsuit brought by the Arizona legislators, predominantly Republicans, asking the Arizona Supreme Court to strike statute 36-2901.08 because the expansion of Medicaid is unconstitutional, or “challenging Governor Jan Brewer’s Medicaid expansion plan,” or “challenging the legality of the state’s Medicaid expansion…”
These journalists are mischaracterizing the Arizona Supreme Court’s opinion. And I am not talking about journalists for small, local papers are making these mistakes…the above quotations are from “The New York Times” and “The Associated Press.”
So, let’s discuss the true, correct ramifications of the Arizona Supreme Court opinion in Biggs…
First, the Biggs opinion does not hold that Medicaid expansion in Arizona or elsewhere is unconstitutional…nor does it decide whether Medicaid expansion in Arizona is invalid on its face.
The opinion, rendered December 31, 2014, only holds that the 36 legislators have the legal standing to bring the lawsuit…there is no holding as to constitutionality of Medicaid expansion, despite so many journalists across America stating it so.
What is standing?
Standing, or locus standi, is the capacity of a party to bring suit in court. This is not a question of whether a person is physically capable of bringing a lawsuit, but whether the person prove that he or she has sustained or will sustain a direct injury or harm and that the harm is redressable (or can be fixed or set right by the lawsuit).
The issue on the Supreme Court level in Arizona is only the narrow issue of whether the 36 legislators have standing. Period.
The Arizona Supreme Court held that the 36 legislators do possess the requisite legal standing in order to bring the lawsuit.
Now, the case will be remanded (sent to a lower court), in this instance, to the Superior Court, for a new fact-finding trial now that the issue of standing has been resolved. In other words, at the lower superior court level, the ref (judge) made a call that the football players on the team (36 legislators) were ineligible to play NCAA football (poor grades, were red-shirted last year), and the alleged ineligible players appealed the decision all the way up. Now the NCAA (AZ Supreme Court) has determined that the players are eligible and the game will resume.
Again, despite the rhetoric put forth by numerous widespread journalists, the 36 legislators are not merely challenging Arizona Medicaid expansion on its face.
Instead, the Arizona Constitution requires that certain Acts that increase state revenues must pass the legislature by a supermajority vote. See Ariz. Const. art. 9, § 22(A).
Remember from the beginning of this blog that 36-2901.08 was passed by a simple majority.
The 36 legislators argue that the assessment of a levy on Arizona hospitals constitute an Act that requires a supermajority vote, which, obviously would require more than a straight 50% approval.
So the 36 legislators’ lawsuit in AZ is about whether 36-2901.08 needs a supermajority or simple majority to vote it into law.
Not whether Medicaid expansion is constitutional.
Believe none of what you hear, and only half of what you see…especially when it comes to journalists and media reporting on lawsuits regarding Medicaid rules and regulations.
Proposed Federal Legislation Will Provide Relief to Hospitals and Medicare Patients in Need of Post-Acute Care
The Center for Medicare and Medicaid (CMS) announced that the new RAC contracts in North Carolina should be ready by the end of the year. This means that, next year, RAC audits on hospitals and other providers will significantly increase in number. Get prepared, providers!!
However, there is proposed federal legislation that could protect hospitals and Medicare patients if passed.
Hypothetical: You present yourself to a hospital. The hospital keeps you in observation for 1 day. You are then formally admitted to the hospital as an inpatient for 2 more days. Under Medicare rules, will Medicare now cover your post-acute care in a skilled nursing facility (SNF)?
Answer: No. Observation days in hospitals do not count toward the Medicare 3-day requirement.
On November 19, 2014, Congressman Kevin Brady introduced draft legislation that would allow hospital observation stays to count toward establishing Medicare eligibility for post-acute services, as well as improve and supervise the RAC program.
You are probably wondering…Why would a hospital keep me in observation for a full day without admitting me as an inpatient when hospitals are reimbursed at a significantly higher rate for inpatient versus outpatient?
Answer: To avoid RAC recoupments.
In recent years, recovery audit contractors (RACs) have been exceedingly aggressive in post payment review audits in challenging hospital claims for short, inpatient stays. The RACs are motivated by money, and all of the RACs are compensated on a contingency basis, which leads to overzealous, sometimes, inaccurate audits. Here in North Carolina, Public Consulting Group (PCG) retains 11.5% of collected audits, and Health Management Systems (HMS) retains 9.75%. See my blog: “NC Medicaid Extrapolation Audits: How Does $100 Become $100,000? Check for Clusters!”
Why have RACs targeted short-stay admissions in hospitals? As mentioned, one-day inpatient stays are paid significantly more than similar outpatient stays. Because of the financial incentives, RACs often focus audits on whether the short-stay is appropriate because this focus will yield a larger overpayment. As a result, hospitals become hesitant to admit patients as an “inpatient” status and, instead, keep the patient in outpatient observation for longer periods of time.
Keeping a person in observation status rather than admitting the person could impact the person’s health and well-being, but it will also impact whether a Medicare patient can receive post-acute care in a SNF (or, rather, whether Medicare will pay for it).
In order for a Medicare patient to receive covered, skilled nursing care after a hospital stay, Medicare requires a 3-day inpatient stay. With the onslaught of RAC audits, hospitals become leery to admit a person as an inpatient. When hospitals are tentative about admitting people, it can adversely affect a person’s post-acute care services.
To give you an idea of how overzealous these RACs are when it comes to auditing Medicare providers, there are over 800,000 pending Medicare appeals. That means that, across the country, RACs and other auditing companies have determined that over 800,000 providers and hospitals that accept Medicare were improperly overpaid for services rendered due to billing errors, etc. Over 800,000 providers and hospitals disagree with the audit results and are appealing. Now, obviously, all 800,000 appeals are hospitals appealing audits findings short-stay admissions not meeting criteria, but enough of them exist to warrant Congressman Brady’s proposed bill.
The proposed bill will significantly impact RAC audits of short-stay admissions in hospitals. But the proposed bill will also extend the current short moratorium on RAC audits on short-stay admissions in hospitals. Basically, the RACs became so overzealous and the Medicare appeals backlog became so large that Congress placed a short moratorium on RACs auditing short-stay admissions under the two-midnight rule through the end of March 2015. The proposed bill will lengthen the moratorium just in time for NC’s new RACs to begin additional hospital audits.
The moral of the story is…you get too greedy, you get nothing…
Remember “The Goose That Laid the Golden Eggs?”
A man and his wife owned a very special goose. Every day the goose would lay a golden egg, which made the couple very rich. “Just think,” said the man’s wife, “If we could have all the golden eggs that are inside the goose, we could be richer much faster.” “You’re right,” said her husband, “We wouldn’t have to wait for the goose to lay her egg every day.” So, the couple killed the goose and cut her open, only to find that she was just like every other goose. She had no golden eggs inside of her at all, and they had no more golden eggs.
Too much greed results in nothing.
Similar to the husband and wife who killed the goose who laid the golden eggs, overzealous and inaccurate audits cause Congress to propose a temporary moratorium on RACs conducting audits on short-term hospital stays until the reimbursement rates are implemented within the same proposed bill (which, in essence will lengthen the moratorium until the rates within the bill are implemented, which also includes additional methods to settle RAC disputes).
The proposed bill, entitled, “The Hospitals Improvements for Payment Act of 2014,” (HIP) would revamp the way in which short hospital stays are reimbursed and how observation days are counted toward Medicare’s 3-day rule for post-acute care; thereby alleviating these painful hospital audits for short inpatient stays. Remember my blog: “Medicare Appeals to OMHA Reaches 15,000 Per Week, Yet Decisions Take Years; Hospital Association Sues Over Medicare Backlog.”
HIP would create a new payment model called the Hospital Prospective Payment System (HPPS) that would apply to short-term hospital stays.
What is a “short stay?” According to the proposed bill, a short stay is a: (1) stay that is less than 3 days; (2) stay that has a national average length of stay less than 3 days; or (3) stay that is “among the most highly ranked discharges that have been denied for reasons of medical necessity.”
Proposed HIP would also require the Department of Health and Human Services (HHS) to establish a new base rate of payment, which will be calculated by blending the base operating rate for short stays and an equivalent base operating rate for overnight hospital outpatient services.
The draft bill would also repeal the 0.2 percent ($200 million per year) reduction that CMS implemented with the two-midnight rule, which is the standard that presumes hospital stays are reasonable if the stay covers two midnights.
The proposed bill also mandates more government supervision as to the RACs.
This proposed bill comes on the cusp of an increased amount of RAC audits in NC on hospitals. As previously discussed, our new RAC contracts will be awarded before the end of this year. So our new RACs will come in with the new year…
The moral of the story?
Expect hospital RAC audits to increase dramatically in the next year, unless this bill is passed.
