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Health Headlines – December 19, 2016


19 Dec 2016
NEWSLETTER

King & Spalding’s Mark Polston Moderates Panel of Former CMS Administrators During the American Bar Association’s 14th Annual Washington Health Law Summit – On December 13, 2016, King & Spalding Healthcare partner Mark Polston moderated a panel of former CMS Administrators during the American Bar Association’s Washington Health Law Summit held in Washington, D.C. for one of the key sessions titled “What’s in Store for Government Healthcare? A Discussion of the Post-Election Future of Medicare, Medicaid and Obamacare with Former CMS Leaders.”  The discussion aired live on C-SPAN and is available for viewing here.  

The panelists included: 

  • Thomas A. Scully, who served as the CMS administrator under President George W. Bush from 2001 through 2004;

  • Leslie Norwalk, who became acting CMS administrator after Scully resigned in 2004 and served in that capacity until 2007; and 

  • Jonathan Blum, who previously served as a deputy administrator for CMS from 2009 through 2014 and member of President Barack Obama’s transition team in 2008.

Central to the discussion was the panelists’ experience with administration transitions and policy shifts, and the complexities that Seema Verma, President-elect Donald Trump’s designated CMS administrator, will face on day one and throughout her tenure.  Especially challenging for Verma will be any changes made to the Medicare and Medicaid programs in order to conform with fiscal responsibility campaign promises.

Partner Kathy Poppitt was co-chair of the Health Law Summit, senior associate Juliet McBride was a member of the program committee, and King & Spalding was one of the Summit’s major sponsors.

Reporter, Juliet M. McBride, Houston, +1 713 276 7448, jmcbride@kslaw.com.

D.C. Circuit Rules against Hospitals on GME Nonhospital Site Written Agreement Provision - On December 9, 2016, the United States Court of Appeals for the D.C. Circuit ruled against two Michigan hospitals, holding that that the written agreements detailing their off-site residency programs failed to comply with the Secretary’s requirements for graduate medical education (GME) reimbursement.  See Borgess Med. Ctr. v. Burwell, No. 13-5330 (D.C. Cir. 2016).  The court held that the agreements in question failed to provide enough specificity accounting for the costs of resident salary, fringe benefits or other required expenses. 

By statute, a hospital is eligible to count time its residents spend performing patient care activities in approved residency programs in nonhospital settings, provided it incurs “all, or substantially all, of the costs for the training program in that setting.”  42 U.S.C. § 1395ww(d)(5)(B)(iv)(I).  For the cost reporting periods in question – 2000 to 2004 – the Secretary’s regulations required that, for a hospital to count the full-time equivalent (FTEs) of residents training at a nonhospital site, there must be a written agreement between the hospital and nonhospital that “indicate[s] that the hospital will incur the cost of the resident’s salary and fringe benefits while the resident is training at the nonhospital site and the hospital is providing reasonable compensation to the nonhospital site for supervisory teaching activities.”  42 C.F.R. § 413.86(f)(4)(ii) (2000).  The current regulation at 42 C.F.R. § 413.78(d) provides the same.

The court reviewed two written agreements put forth by the hospitals as meeting the Secretary’s requirements.  First, the court examined a 1973 agreement between the two hospitals to establish a non-profit organization under which the hospitals managed their medical education programs and through which they agreed to provide annual financing.  Because this agreement was not between a hospital and nonhospital, the court found that it failed to meet the Secretary’s written agreement policies.  Furthermore, the agreement’s only description of financing (“the parties shall provide [the non-profit] with financing to carry out its purpose as negotiated on a yearly basis”) did not provide the required specificity because it failed to indicate that either hospital would incur the costs of resident salary or fringe benefits.

Second, the court examined affiliation agreements between the hospitals and the non-profit’s successor organization.  Similar to the above agreement, the affiliation agreements required the hospitals to incur “joint and equal responsibility for providing [the non-profit] with sufficient financing to carry out its programs as negotiated on a yearly basis.”  The non-profit, affiliated with Michigan State University, also received millions of dollars from other sources including patient care revenue, university funding and contracts/grants.  Thus, the affiliation agreements required the hospitals to make up the difference of expenses after accounting for all other funds.  The court also rejected these agreements as lacking specificity, stating that they “fail to specify which programs the [h]ospitals are financing or how the funds will be used.”

Lastly, the court rejected the hospitals attempt to demonstrate compliance with the written agreement regulation “through conduct.”  Although the court found that the regulations provide no option to satisfy the written agreement through conduct, it nonetheless considered - and rejected - whether the financial records of the non-profit provided the required specificity.  Because the count ultimately found that the hospitals failed to meet the Secretary’s written agreement requirement, it did not reach the question of whether the hospital’s cost sharing complied with the “all or substantially all” requirement.

A copy of the opinion is available on the D.C. Circuit’s website here.

Reporter, Elizabeth Swayne, Washington, D.C., +1 202 383 8932, eswayne@kslaw.com.

DOJ Recovers Over $4.7 Billion in False Claims Act Suits in Fiscal Year 2016 – On December 14, 2016, the Department of Justice (DOJ) announced that it recovered more than $4.7 billion in settlements and judgments involving fraud and false claims in fiscal year 2016.  The fiscal year 2016 recovery represents the third highest annual recovery in the history of the False Claims Act (FCA).  Since 2009, the government has recovered $19.3 billion in healthcare fraud claims. 

Claims Related to the Healthcare Industry.  The bulk of the recoveries in FY 2016 came from the healthcare industry at $2.5 billion.  Of that $2.5 billion, $1.2 billion came from the drug and medical device industry, $360 million came from hospitals and outpatient clinics, $260 million came from the medical laboratory industry, and $160 million came from skilled nursing facilities. 

According to the recently updated fraud statistics, which were released in connection with the press release, the number of DOJ-initiated healthcare FCA actions increased from 26 in FY 2015 to 69 in FY 2016.  Additionally, the number of qui tam suits involving the healthcare industry rose from 426 in FY 2015 to 501 in FY 2016.

Individual Accountability.  In keeping with the principles articulated in the September 9, 2015 Yates Memo, the DOJ reiterated its commitment “[t]o use the False Claims Act and other civil remedies to deter and redress fraud by individuals as well as corporations.”  To that end, the press release identifies several instances where the government pursued claims against individuals, including, but not limited to, the following:

  • Ralph J. Cox III, the former CEO of Tuomey Healthcare System, agreed to pay $1 million to settle FCA allegations for billing federal healthcare programs for services referred by physicians with whom the healthcare system had improper financial relationships.

  • Dr. Asad Qamar and his practice paid $2 million and released claims to an additional $5.3 million in suspended Medicare funds in order to settle allegations that he billed federal healthcare programs for unnecessary procedures and paid kickbacks to patients by waiving their copayment amounts. Dr. Qamar also agreed to a three-year exclusion from federal healthcare programs that will be followed by a three-year integrity agreement with OIG.

  • Dr. Jonathan Oppenheimer, former owner and CEO of a drug testing laboratory, OPKO Health, Inc., and OPKO Lab, LLC agreed to pay $9.35 million to resolve FCA allegations with the government.
  • Dr. David G. Bostwick agreed to pay $3.75 million to settle FCA allegations that he billed Medicare and Medicaid for medically unnecessary cancer detection tests and offered incentives to physicians to obtain Medicare and Medicaid business. 

  • Dr. David Spellberg agreed to pay $1.05 million to settle FCA allegations that he caused claims to be submitted to federal healthcare programs for tests that were not medically necessary.

Whistleblower Suits.  Suits brought under the qui tam provisions of the FCA accounted for approximately $2.9 billion of the government’s total $4.7 billion recovery in fiscal year 2016.  The DOJ press release reported that “[t]he number of lawsuits filed under the qui tam provisions of the [FCA] has grown significantly since 1986, with 702 qui tam suits filed this past year—an average of 13.5 new cases every week.”

For further information, please see the below links:

  • The DOJ press release can be found by clicking here;
  • The DOJ Fraud Statistics can be found by clicking here; and

  • The Fact Sheet on Significant False Claims Act Settlements and Judgments for Fiscal Years 2009–2016 can be found by clicking here.

Reporter, Brittany Strandell, Atlanta, +1 404 572 2796, bstrandell@kslaw.com

HHS Announces New Medicare-Medicaid Accountable Care Organization Model – On December 15, 2016, HHS announced an Accountable Care Organization (ACO) initiative for beneficiaries who are dually eligible for Medicare and Medicaid.  The Medicare-Medicaid ACO Model (Model) builds on the Medicare Shared Savings Program.  Currently, Medicare ACO initiatives do not have financial accountability for the cost of Medicaid expenditures or for quality of care of Medicare-Medicaid dual enrollees. 

Through this initiative, CMS will partner with up to six interested states to offer Medicare ACOs in those states the opportunity to manage Medicaid costs for Medicare-Medicaid dual enrollees.  Interested states must have a sufficient number of Medicare-Medicaid dual enrollees in fee-for-service Medicare and Medicaid, but preference will be given to states with low Medicare ACO saturation.  States can submit a letter of intent to participate in the Model and choose from three options for when to begin the first 12-month performance period:  January 1, 2018; January 1, 2019; or January 1, 2020.  Once a state is approved to participate in the Model, a request for application will be released to ACOs and providers in that state.   

Additional information on the Medicare-Medicaid ACO Model, including how to apply, is available here

Reporter, Jennifer S. Lewin, Atlanta, + 404 572 3569, jlewin@kslaw.com

ALSO IN THE NEWS:

21st Century Cures Act Signed into Law – On December 13, 2016, President Obama signed the 21st Century Cures Act into law.  The 21st Century Cures Act is intended to modernize health care delivery and speed up and improve medical research and innovations.  In addition, it also excepts so-called “mid-build” hospital outpatient departments from OPPS payment changes required by Section 603 of the Bipartisan Budget Act of 2015.  To qualify for the mid-build exception, hospitals must submit both a letter from the hospital’s CEO or COO stating that their department meets the definition of “mid-build” and a complete provider-based attestation within 60 days from December 13 (Saturday, February 11, 2017). 

Because the deadline falls on a Saturday, it likely will be extended to the next business day, Monday, February 13.  However, providers should strongly consider submitting their materials to their Medicare Administrative Contractor prior to Friday, February 10, to remove any question of timeliness.  For more information regarding the mid-build outpatient department exception and the 21st Century Cures Act, click here.

King & Spalding Client Alert on Anti-Kickback Statute Safe Harbors and Civil Money Penalty Regulations Final Rule – On December 7, 2016, OIG published a final rule to amend the Anti-Kickback Statute by adding new safe harbors and to revise the definition of “remuneration” in the civil monetary penalty rule. The Final Rule becomes effective on January 6, 2017.  To view King & Spalding’s detailed Client Alert, click here.

PEOPLE