Publications

HHS-OIG Releases 2013 Work Plan, Outlining New Areas of Scrutiny for Providers and Payors – Last week, the Department of Health and Human Services, Office of Inspector General (OIG) released its Work Plan for Fiscal Year 2013 (Work Plan), detailing the areas OIG will be scrutinizing in 2013.  On the Medicare side, OIG will examine hospitals, other providers, medical equipment suppliers, and pharmaceutical manufacturers in many areas including new areas of inquiry for Medicare Advantage plans and Part D prescription plans.  On the Medicaid side, the Work Plan includes new areas of scrutiny for pharmaceutical manufacturers and Medicaid managed care plans.  Among the new areas of scrutiny, broken down by category, are:

Hospitals

• Compliance with Medicare requirements for inpatient billing, particularly in light of the substantial 2008 changes in the inpatient prospective payment system;
• Feasibility of reducing payments by bundling outpatient services delivered up to 14 days prior to an inpatient hospital admission into the diagnosis-related group (DRG) payment.  (Currently, Medicare bundles only outpatient services delivered 3 days before an inpatient hospital admission);
• Existence and impact of Medicare payments for services by non-hospital-owned physician practices that are unnecessarily higher because the practices can bill as the hospital;
• Existence of hospital bills for beneficiary discharges that should have been billed as transfers or as discharges to a swing bed in another hospital; and
• Potential reduction in costs for CMS if it were to preclude certain claims where surgical procedures are canceled.

Medical Equipment and Suppliers

• Adequacy of accreditation organization requirements for granting accreditation to medical equipment suppliers (and whether such requirements meet Medicare’s quality standards);
• Appropriateness of claims for payment submitted by medical equipment suppliers for lower limb prostheses; and
• Appropriateness of claims submitted by medical equipment suppliers for power mobility devices.

Other Providers and Suppliers

• Appropriateness of 2011 ophthalmological services billing;
• Adequacy of CMS oversight mechanisms related to the off-label and off-drug compendia use of Medicare Part B drugs;
• Adequacy of documentation submitted in support of claims for payment under Medicare Part B for immunosuppressive drugs; and
• Potential cost savings to Medicare had payments for Medicare Part B drugs infused through medical equipment been based on average sales price instead of average wholesale price.

Medicare Advantage Plans

• Adequacy of notices of denied requests for services or payments that are sent to beneficiaries with respect to how clearly the beneficiaries’ right to request reconsiderations and to appeal are explained; and
• Completeness, consistency and accuracy of encounter data reflecting the items and services provided to Medicare Advantage plans (particularly in light of new expanded reporting requirements).

Prescription Drug Program

• Sufficiency of pharmaceutical manufacturer safeguards in place to ensure that beneficiaries do not use copayment coupons to obtain prescription drugs paid for by Medicare Part D;
• Sufficiency of voluntary reports received by CMS since 2010 regarding anti-fraud activity data;
• Adequacy of Part D plan oversight of the ways in which pharmacy benefit managers are carrying out their responsibilities to administer the formularies and manage prescription drug use; and
• Negative impact of the differences in Part D plan specialty tier formularies and cost-sharing arrangements on beneficiary’s choices of plans, drug adherence, and choice of drugs.

Medicaid

• Pharmaceutical manufacturer compliance with average manufacturers price reporting requirements;
• Establishment and adequacy of State controls for collecting Medicaid rebates on physician-administered drugs; and
• Collection of the basic Federal minimum rebate amount required by the Patient Protection and Affordable Care Act of 2010 from pharmaceutical manufacturers.

Medicaid Managed Care

• Sufficiency of Medicaid managed care provider networks to provide adequate access to all Medicaid services;
• Adequacy of State monitoring of Medicaid managed care organizations’ (MCOs) grievances and appeals systems for compliance with federal requirements; and
• Adequacy of Medicaid MCOs fraud, waste, and abuse prevention and detection processes.

To view a copy of the Work Plan, please click here.  We would be pleased to answer any questions you may have regarding the Work Plan or the steps your organization should consider taking in anticipation of these inquiries.  

Reporter, John C. Richter, Washington, D.C., +1 202 626 5617, jrichter@kslaw.com.

OIG Issues Second Evaluation on Excluded Individuals Participating in Medicaid Managed Care Provider Networks – On September 27, 2012, the OIG issued its second evaluation (OEI-07-09-00632) on excluded individuals who were employed by service providers participating in Medicaid managed care provider networks in 2011 (the Report).  According to the Report, approximately 70 percent of Medicaid beneficiaries receive all or part of their Medicaid services through managed care.  The OIG’s review included twelve Medicaid managed care entities (MCEs) and sampled approximately 500 providers (the provider population of the twelve MCEs was limited to hospitals, nursing facilities, home health agencies, and pharmacies).  The OIG identified sixteen excluded individuals out of approximately 249,000 individuals employed by the 500 sampled providers. 

In addition to evaluating the number of excluded individuals participating in Medicaid managed care networks, the OIG also requested that each sampled provider complete a survey regarding the safeguards it employs to confirm that it does not employ excluded individuals.  Seven percent of providers enrolled in the twelve MCE provider networks included in this evaluation reported that they do not check the exclusion status of their employees. The OIG did not review state exclusion lists during its evaluation. 

Of the sixteen excluded providers identified during the OIG’s study, nine excluded individuals were directly involved in patient care.  Additionally, fourteen of the excluded individuals were directly employed by the sampled providers.  The OIG provided the following exclusion authorities for the sixteen excluded individuals identified during its evaluation:

• Seven individuals were excluded because their licenses had been revoked (Section 1128(b)(4) of the Act);
• Five individuals were excluded because of program-related convictions (Section 1128(a)(1) of the Act);
• Three individuals were excluded because of convictions for patient abuse and/or neglect (Section 1128(a)(2) of the Act); and
• One individual was excluded because of a felony conviction of health care fraud (Section 1128(a)(3) of the Act).

According to the Report, the sampled providers who employed these sixteen excluded individuals provided the following explanations, among others, for why these individuals were employed.

• Incorrect names were given to the sampled provider or the name was misspelled;
• Contracted staffing agencies did not identify employees’ exclusion status correctly; and
• Contracted background check vendors did not identify employees’ exclusion status correctly.

The OIG concluded the report by stating that “[g]iven the number of excluded providers identified in the small number of MCEs examined, CMS may want to reinforce its guidance to MCEs on their obligation to check – and to require their network providers to check – OIG’s [List of Excluded Individuals/Entities] on a monthly basis to identify exclusions and reinstatements.”

To view the Report, click here.

Reporter, Stephanie F. Johnson, Atlanta, + 1 404 572 4629, sfjohnson@kslaw.com.

CMS Announces Calculation Error in Readmissions Adjustment Factors – In a correction notice published in the October 3, 2012 Federal Register, CMS stated that it erroneously included admission data predating the “applicable period” for the FY 2013 Hospital Readmissions Reduction Program when it calculated the Readmissions Adjustment Factors released in the FY 2013 Hospital IPPS Final Rule.  Contrary to the policy adopted in the Final Rule, it “inadvertently included Medicare inpatient claims from the FY 2008 MedPAR file with discharge dates occurring prior to July 1, 2008 in determining the base operating DRG payment amounts in the calculation of aggregate payments for excess readmissions and aggregate payments for all discharges that were used to calculate the readmissions adjustment factors published for the FY 2013 IPPS/LTCH final rule.”  CMS has published corrected Readmissions Adjustment Factors, and now estimates that 2,217 hospitals will have their base operating DRG payments reduced under the Program (up from 2,206 estimated in the Final Rule).

A decrease in a hospital’s Readmissions Adjustment Factor results in a corresponding increase in the hospital’s penalty under the Program.  Our own calculations indicate that of 3500 listed providers, 1422 hospitals’ (40.6%) Readmissions Adjustment Factors decreased from the values published in the FY 2013 Hospital IPPS Final Rule, published August 31, 2012.  These reductions ranged from 0.01% to 0.11%.  There was no change for 2023 hospitals (57.8%), while Adjustment Factors increased for 55 hospitals (1.6%).

A copy of the correction notice is available by clicking here, and may also be viewed on the CMS website.  The corrected FY 2013 Readmission Payment Adjustment Factors are available in the “Downloads” section of the Readmissions Reduction Program website.

Reporter, Susan Banks, Washington, D.C., +1 202 626 2953, sbanks@kslaw.com.

Grassley is Investigating 340B Revenue – Senator Charles E. Grassley (R-IA), ranking member on the Senate Judiciary Committee, has sent letters to three non-profit hospitals in North Carolina after recent articles published in two state and local newspapers announced the results of an investigation allegedly showing that these hospitals’ negotiated insurance rates are generating large profits on chemotherapy drugs purchased through the 340B drug discount program.  The 340B drug discount program ensures access to discounted outpatient drugs for covered entities.  Senator Grassley’s inquiry letters request, inter alia, information on the hospitals’ charitable care policies and the extent to which 340B savings have been reinvested by the hospitals for the benefit of uninsured patients.

Each of the inquiry letters alleges that:

. . . [W]hen selling these deeply discounted drugs, [the hospital] does not seem to be passing those savings on to its patients.  Instead, the 340B discounts appear to be simply subsidizing its bottom line operating margins. . . . If ‘non-profit’ hospitals are essentially profiting from the 340B program without passing those savings to its patients, then the 340B program is not functioning as intended.

Senator Grassley’s letters are available by clicking here.  The September 22, 2012 News and Observer article is available on the newspaper’s website.  The September 24, 2012 Charlotte Observer article is available by clicking here here.

Reporter, Susan Banks, Washington, D.C., +1 202 626 2953, sbanks@kslaw.com.

Congressional Research Service Finds Sequestration Would Have “Somewhat Limited” Effect on Health Reform Spending – An October 1, 2012 report from the Congressional Research Service (CRS) analyzes the impact of impending across-the-board cuts to Federal spending known as “sequestration” on implementation of the Affordable Care Act (ACA).  Overall, the report finds that sequestration would have a relatively low impact on ACA-related spending because much of it remains exempt from the sequester.  The Budget Control Act of 2011 (BCA) requires spending cuts during FYs 2013-2021 in order to shave $2.1 trillion from the federal budget deficit.

The BCA specifically exempts Medicaid from sequestration.  Because much of the ACA’s expansion of insurance coverage results from an expansion in Medicaid eligibility, the report finds that funding to support such an expansion will be exempt from sequestration.  Moreover, refundable tax credits, including those established by the ACA to subsidize the purchase of insurance by individuals who do not qualify for Medicaid, also are exempt from sequestration. 

In general, the report finds, discretionary spending authorized by the ACA will be subject to sequestration in FY 2013.  For subsequent years, the BCA establishes limits on overall federal spending.  The report notes that ACA-related discretionary spending in those years is likely to be reduced as “Congress and the President . . . determine through the annual appropriations process which accounts are to be reduced, and by how much, in order to meet those limits.”  The report also notes, however, that the cuts apply only to “new budget authority” for a given year; that is, money that Congress has specifically made available for use beginning in FY 2013 or later.  The cuts will not apply to funds appropriated under the ACA for use beginning in a prior fiscal year (i.e., FYs 2010 and 2011) that remain unspent.  Such “unobligated balances” include funding to the Pre-Existing Condition Insurance Plan. 

The CRS report is 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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