HHS and DOJ Issue Stern Warning Letter To Hospitals Regarding Fraud In Electronic Health Records – On September 24, 2012, HHS Secretary Kathleen Sebelius and Attorney General Eric Holder issued a letter to heads of the nation’s leading hospital trade associations suggesting that there were “troubling indications” that providers were using electronic health records (EHR) to obtain payments to which they were not entitled and warning that such activity would not be tolerated. The letter appears to have come in reaction to an article published in the New York Times on September 22, 2012 that attributed a portion of the recent growth in health care costs to the increased use of EHR.
Although calls for increased use of EHR began earlier, the switch to electronic health records was first mandated by the American Recovery and Reinvestment Act of 2009 (the “Stimulus Act”). That law provided financial incentives beginning in 2011 to providers who invested in electronic health record technology and imposed penalties beginning in 2015 for providers who have not become meaningful EHR users. At the time, the mandate was justified on the basis that the use of EHR would improve efficiency and patient safety and reduce health care costs.
The American Hospital Association (AHA) immediately responded to Secretary Sebelius and Attorney General Holder. In its letter, the AHA agreed that fraud should not be tolerated, but pointed out that inaccurate documentation and coding in EHR does not necessarily equate with fraud. It also noted that, notwithstanding many requests, CMS has failed to establish any guidelines for coding in EHR. The AHA’s response further pointed out that the federal government has exacerbated the coding complexities by “drastically” increasing the number of third-party program integrity auditors, such as Recovery Audit Contractors, Medicare Administrative Contractors, Medicaid Integrity Contractors, and Zone Program Integrity Contractors. The AHA asserted that “while the payment accuracy programs may be well intentioned, they need to be streamlined with duplicative audits eliminated and inappropriate denials halted. Furthermore, investments should be made in provider education and payment system fixes to prevent payment mistakes before they occur.”
Time will tell whether Secretary Sebelius and Attorney General Holder’s letter last week was simply an election year communication designed to blunt criticism. The issuance of such a stern warning, however, asserting that instances of fraud attributable to the use of EHR are actually on the rise certainly has raised the visibility of the issue. Hospitals and other providers should expect, therefore, that the use of EHR in billing and coding may receive greater scrutiny. In addition, they should be prepared for an increase in the number of whistleblowers raising allegations in this area. Hospitals and providers may benefit, therefore, from taking proactive measures now to examine their own EHR processes.
Reporter, John C. Richter, Washington, D.C., + 1 202 626 5617, jrichter@kslaw.com.
Oklahoma Challenges Final Rules Implementing the Employer Mandate – On September 19, 2012, the State of Oklahoma amended its initial complaint filed on January 21, 2011 in the Eastern District of Oklahoma originally challenging the “individual mandate” of the Affordable Care Act (ACA), to now challenge final Internal Revenue Code rules implementing what is commonly known as the “employer mandate.” To incentivize employers to provide health insurance coverage to their employees, ACA requires a large employer to essentially pay an assessment if the federal government makes or could have made a subsidy payment to an insurer on behalf of an employee of the large employer. As a result of a technical glitch in ACA’s language, however, ACA only implements the large “employer mandate” in states that have adopted their own state insurance exchanges. Oklahoma argues that the Treasury Department and HHS have interpreted final Internal Revenue Code rules in a way that exceeds ACA’s statutory authority by also authorizing the imposition of assessments on large employers in states that have chosen not to create an insurance exchange. Oklahoma challenges the final rules in its capacity both as a State and as a large employer. The State maintains that it has elected not to create a state insurance exchange in order to prevent Oklahoma employers from paying this assessment and thus “preserve a competitive advantage in the area of job growth.”
Oklahoma seeks a declaration that the terms used in the final Internal Revenue Code rule do not apply the large employer assessment to states where the state has not elected to create a state insurance exchange. The State also requests that a permanent injunction be imposed forbidding the Treasury Department and HHS from acting in a manner that would interpret the regulations as applying the assessment to such states. Click here for a copy of the complaint.
Reporter, Kate Stern, Atlanta, +1 404 572 4661, kstern@kslaw.com.
AHRQ Report Studies Effects of Bundled Payments on Cost and Quality – An August 2012 report by the Agency for Healthcare Research and Quality (AHRQ) concluded that bundled payment programs may be associated with reductions in health care spending and utilization and may have a small effect on quality measures. The AHRQ report defines bundled payment as “a method in which payments to health care providers are related to the predetermined expected costs of a grouping, or ‘bundle,’ of related health care services.” As part of its study, AHRQ reviewed 58 bundled payment studies and 4 review articles to (1) examine the effects of bundled payments on spending and quality of care measures and (2) understand how key design and contextual features of bundled payment programs may impact outcomes.
The AHRQ study found that transitioning from cost-based or fee-for-service payment to bundled payment models generally resulted in a decrease in health care spending and utilization. Specifically, the study noted a decrease in spending of 10 percent or less, and a 5 to 15 percent reduction in utilization of services, depending on the underlying program. The report also found somewhat inconsistent results with respect to bundled payment’s effect on quality, noting that in a given program, some quality measures improved while others worsened.
The AHRQ report also determined that there was insufficient evidence to estimate the impact of bundled payment by key design features and contextual factors. According to AHRQ, more research is needed with respect to design features, including the number of providers and services included in the bundle, the methods for limiting financial risk, the use of quality measurement, and the methods for distributing payment among participating providers. In addition, future studies should address contextual factors such as whether bundled payment is more effective in highly integrated delivery settings, the role financial pressure plays in spending and utilization, and the impact on different subgroups of patients.
The AHRQ report noted that its findings were subject to several limitations. For example, most of the bundled payment programs that were reviewed as part of the study were focused on single institutional providers such as hospitals or skilled nursing facilities, and may not be easily generalized to programs with multiple providers or provider types, or to newer bundled payment programs. In addition, the report cautioned that the results may be limited by the quality of the underlying studies and review articles.
The full version of the AHRQ report is available here.
Reporter, Jennifer Simmen Lewin, Atlanta, + 1 404 572 3569, jlewin@kslaw.com.
House Budget Committee's Democrats Publish FAQs on Sequestration – Democratic members of the U.S. House Budget Committee have released a brief Frequently Asked Questions primer on the budget sequestration set to take effect on January 2, 2013. The Budget Control Act of 2011 requires across-the-board cuts to Federal spending in an attempt to reduce the Federal budget deficit by $1.2 trillion by 2021. The Act caps reductions in Medicare payments to providers and suppliers at two percent. The FAQs do not provide much detail on how CMS will administer those cuts. Rather, the document offers a concise overview of how sequestration works generally and the amount of savings the law exacts from defense and non-defense programs. Of note, the Democratic members expect that the Medicare cuts will also reduce Medicare premiums for beneficiaries because such premiums are based on total program costs ― ultimately resulting in lower premium collections for the Medicare program and “offset[ting] a portion of the savings in the program.” The FAQs are available here.
Reporter, Christopher Kenny, Washington, D.C., + 1 202 626 9253, ckenny@kslaw.com.
This bulletin provides a general summary of recent legal developments. It is not intended to be and should not be relied upon as legal advice.
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