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King & Spalding Client Alert: New Medicare Advantage Regulations Add Provider and Beneficiary Protections Against Plan Utilization Management Policies |
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On April 5, 2023, CMS issued a Final Rule (CMS-4201-F) regarding the Medicare Advantage (MA) and Part D programs. The Final Rule includes changes related to various aspects of those programs, including utilization management (UM) programs, Star Ratings, marketing and communications, health equity, provider directories, and network adequacy. Please click here for the full Client Alert with additional detail and insight into the Final Rule. Sixth Circuit’s Defendant-Friendly Opinion Joins Circuit Split on Anti-Kickback Statute Pleading Standard |
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On March 28, 2023, the Sixth Circuit issued a decision interpreting the definition of remuneration under the Anti-Kickback Statute (AKS) and the level of causation necessary for a False Claims Act (FCA) action to be premised on the AKS. The Sixth Circuit’s narrow interpretation of remuneration requires alleging just payments and other transfers of value. The court also held that relators must meet an exacting “but for” causation standard when alleging FCA actions premised on the AKS. This decision widens a pre-existing circuit split as to what a relator must allege to plead that a false claim “results from” an AKS violation. Background The AKS is a criminal statute that bars defendants from willfully offering, paying, soliciting or accepting remuneration to induce referrals of items or services reimbursable by a federal healthcare program. The FCA is a civil statute imposing liability on defendants that submit or cause the submission of false claims to the federal government. The government and qui tam relators have connected the two statutes, positing that if a defendant commits an AKS violation, it follows that all related claims to the government are also false under the FCA. Initially, courts disagreed on when and how AKS violations led to FCA liability, but in 2010, Congress amended the FCA to provide that a claim “resulting from” a violation of the AKS is necessarily a false claim under the FCA. Notably, the FCA, as amended, does not define “remuneration” or “resulting from.” The Sixth Circuit interpreted both undefined terms in United States ex rel. Martin v. Hathaway, 63 F.4th 1043 (6th Cir. 2023). United States ex rel. Martin v. Hathaway In Martin, the relator, an ophthalmologist named Dr. Martin, alleged that a small-town Michigan hospital declined to hire her in order to maintain a steady flow of referrals from a different ophthalmologist, Dr. Hathaway. Dr. Martin alleged the hiring decision was “something of value” and thus constituted improper remuneration in exchange for Dr. Hathaway’s referrals. Relator also alleged that the claims submitted to Medicare “resulted from” that purported kickback and thus violated the FCA. The district court dismissed the complaint with prejudice for failure to state a claim upon which relief could be granted. On appeal, the Sixth Circuit considered “(1) whether a hospital’s decision not to hire an ophthalmologist in return for a general commitment of continued surgery referrals from another ophthalmologist for patients from the local community counts as the kind of ‘remuneration’ covered by the Anti-Kickback Statute, and (2) whether claims from such continued referrals ‘result[ed] from’ violations of the statute.” The Sixth Circuit affirmed the district court’s dismissal, and answered “no” to both questions. The Sixth Circuit held that remuneration means “just payments and other transfers of value,” not “any act that may be valuable to another,” as proposed by the relator and the federal government. The Sixth Circuit looked to a number of sources to reach this determination, including the plain language of the AKS, dictionary definitions, other Congressional uses of the term, common-sense, OIG guidance, and real-world problems faced by medical providers and hospitals. Despite the fact that the case arose in the civil context, the court also considered the rule of lenity because the AKS is a criminal statute. The court held that the broader interpretation advocated by the relator and government “lacks a coherent endpoint.” As applied to the facts of the case, the court held even though the hiring decision may have benefitted Dr. Hathaway, there was “no evidence that anyone paid anyone anything or changed the value or cost of any services that otherwise would have been received.” The Sixth Circuit also held that even if the hiring decision had been remuneration, the relator failed to allege that any claims to a federal healthcare program “resulted from” that decision. The court reasoned that an FCA plaintiff must establish “but-for” causation to prove false claims “result from” an AKS violation. The Sixth Circuit held the ordinary meaning of the phrase “resulting from” requires but-for causation, the ordinary meaning controls unless strong textual or contextual sources show a contrary meaning, and there was no contrary meaning. The “but-for” causation standard requires showing that a claim would not have occurred absent the alleged kickback. The Sixth Circuit explained that independent decisions of physicians may break any plausible chain of causation. Additionally, temporal proximity between an alleged kickback and a claim, without more, is not enough to show causation. In interpreting both “remuneration” and the causation standard, the court cautioned that reading the terms too loosely risks implicating doctors of good intent merely engaging in the “workaday practice of medicine.” As an example of this point, the court describes a hypothetical doctor concerned with the outdated surgical equipment at a hospital. If the doctor tells the hospital she will only send referrals if the hospital updates the equipment, that is a promised referral. If the AKS were to view anything of value as remuneration, then upgraded surgical equipment could be an AKS violation, and any subsequent referral by the doctor to the hospital an FCA violation. The court rejected these “boundless” interpretations, which risked “sweeping in the vice-ridden and virtuous alike.” Impact of Holding This decision is a significant victory for FCA defendants. Both definitions limit the potential scope of conduct that may constitute an AKS violation as the basis of a FCA claim. There has been a pre-existing circuit split between the Third and Eighth Circuits on the applicable standard for evaluating whether a FCA violation “results from” an alleged kickback, with the Third Circuit taking a more lenient interpretation and merely requiring a “link” or “some connection” between a kickback and a claim. See United States ex rel. Cairns v. D.S. Medical L.L.C., 42 F.4th 828, 834–36 (8th Cir. 2022); United States ex rel. Greenfield v. Medco Health Sols., Inc., 880 F.3d 89, 100 (3d Cir. 2018). The Sixth Circuit expressly rejected the Third Circuit’s interpretation, explaining that the Third Circuit’s decision improperly relied on legislative history. The Sixth Circuit’s interpretation of the but-for causation standard joins the Eighth Circuit, and adds weight to appellate authority favoring the but-for standard. The Martin opinion is available here. Reporter, Alana Broe, Atlanta, +1 404 572 2720, abroe@kslaw.com. |
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CMS Issues Proposed Rules Updating Medicare Payments and Policies for Hospice Providers and the Inpatient Rehabilitation Facility Prospective Payment System and Quality Reporting Program |
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On March 31, 2023, CMS issued a proposed rule updating Medicare hospice payments and policies and the aggregate cap amount for Fiscal Year (FY) 2024 (Proposed Hospice Rule). Additionally, on April 3, 2023, CMS issued a proposed rule updating Medicare payments and policies under the Inpatient Rehabilitation Facility (IRF) Prospective Payment System and the IRF Quality Reporting Program for FY 2024 (Proposed IRF Rule). Proposed Hospice Rule The Proposed Hospice Rule includes CMS’s routine updates to the hospice payment rates and aggregate cap amount for FY 2024. The Proposed Hospice Rule also contains information on hospice utilization trends and CMS’s analysis on non-hospice spending during hospice elections, ownership transparency, and hospice election decision-making. In addition, the Proposed Hospice Rule proposes updates to the Hospice Quality Reporting Program. The Proposed Hospice Rule proposes to update the Medicare base rate for hospice payments by 2.8% for FY 2024, equating to an increase of $720 million in payments over FY 2023. The Proposed Hospice Rule also proposes to update the aggregate hospice cap for FY 2024 to $33,396.55, which would be an increase of 2.8% over the aggregate cap for FY 2023, which was set at $32,486.92. Additionally, for FY 2024 and each subsequent year thereafter, the proposed rule would require hospices that fail to meet quality reporting requirements receive a 4% reduction to their annual hospice payment update percentage increase for the year. Depending on the amount of the annual hospice payment update for a particular year, a reduction of 4% beginning in 2024 could result in hospice payment rates that are less than payment rates from the previous fiscal year. However, this penalty would only apply for the specified fiscal year. The Proposed Hospital Rule also contains information on spending and utilization of hospice services. According to the Proposed Hospice Rule’s fact sheet, available here, CMS is looking closely at the hospice industry and has increased concerns about fraud, waste, and abuse. As such, the Proposed Hospice Rule includes information on utilization trends, spending patterns for non-hospice services provided during the election of hospice, ownership transparency, equipping patients and caregivers with information to aid in the hospice election decision-making process, and methods to examine health equity under hospice. The Proposed Hospice Rule notes that the number of Medicare beneficiaries receiving the Medicare hospice benefit has grown from 715,349 in 2003 to over 1.7 million in 2022 and that Medicare hospice expenditures have risen from $5 billion in 2003 to approximately $23 billion in 2022. CMS anticipates that aggregate hospice expenditures will continue to increase by about 9.1% annually. The Proposed Hospice Rule further notes that Medicare payments for non-hospice Medicare Part A and B items and services during hospice elections increased from $685,155,617 in 2019 to $882,965,833 in 2022. CMS is seeking more information from providers to better address quality and access issues for Medicare beneficiaries. CMS is also soliciting comments from the public on how to address these issues through, for example, establishing methods to ensure that hospice is appropriately covering services, instituting requirements to provide additional information to patients and families about which services are covered under the hospice benefit and how that information should be communicated, and understanding the reasons why non-hospice care spending is growing for beneficiaries who elect hospice. CMS will accept comments on the Proposed Hospice Rule until May 30, 2023. The Proposed Hospice Rule can be read in full here. Proposed IRF Rule On April 3, 2023, CMS issued the Proposed IRF Rule for FY 2024. Under the Proposed IRF Rule, the IRF Prospective Payment System rates would increase by 3%, which is based on the proposed IRF market basket update of 3.2% minus 0.2% productivity adjustment. The Proposed IRF Rule would also adjust the outlier threshold to maintain outlier payments at 3% of total payments, which would increase IRF payments by 3.7% percent (about $335 million) for FY 2024 as compared with payments in FY 2023. In addition, the Proposed IRF Rule would allow hospitals to open new IRF units and obtain payment under the IRF Prospective Payment System at any time during the cost reporting period with 30-day advance notice to the appropriate CMS regional office and Medicare Administrative Contractor before the date of the change. Under the IRF Quality Reporting Program, IRFs are required to report standardized patient assessment data about quality measures to CMS. The Proposed IRF Rule proposes certain updates to IRF Quality Reporting Program measures:
The Proposed IRF Rule can be read in full here, and the Fact Sheet for the Proposed IRF Rule can be found here. CMS will accept comments on the Proposed IRF Rule until June 2, 2023. Reporter, Brittany Bratcher, Austin, +1 512 457 2071, bbratcher@kslaw.com. |
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CMS Issues Proposed Rules to Update Medicare Payment Rates and Policies for Skilled Nursing Facilities and Inpatient Psychiatric Facilities for FY 2024 |
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On April 4, 2023, CMS issued proposed rules for Fiscal Year (FY) 2024 to update Medicare payment policies for skilled nursing facilities (SNFs) and inpatient psychiatric facilities (IPFs). CMS notes these rules are intended to improve safety and quality of care in nursing homes and to increase access to essential inpatient psychiatric services and available beds. SNF Proposed Rule The SNF Proposed Rule includes changes and updates to the payment rates, quality reporting program (QRP), Value-Based Purchasing (VBP) Program, and waiver of hearing under Civil Monetary Penalties (CMP). CMS is reviewing the comments to the minimum staffing requirements in its proposed rule for FY 2023 but did not issue an update in the Proposed Rule for FY 2024. Proposed Updates to the SNF Payment Rates CMS estimates that the updates to the payment policies would result in a net increase of 3.7%, or approximately $1.2 billion, in Medicare Part A payments to SNFs in FY 2024. This increase reflects a $2 billion increase resulting from the 6.1% net market basket update to the payment rates, which is based on a 2.7% market basket update plus a 3.6% point increase to counter the agency’s market basket error in FY 2022, minus a 0.2% point productivity decrease. It also includes a proposed 2.3% point cut in FY 2024 to the SNF prospective payment system rates. Proposed Updates to the SNF QRP The SNF Proposed Rule includes addition, deletion, and modification of performance measures to the SNF QRP, under which SNFs are subject to a 2% point reduction in their annual payment update if they fail to meet reporting requirements.
Proposed Changes to the SNF VBP Program The SNF Proposed Rule includes additions of four new quality measures to the VBP Program, which awards SNFs with incentive payments based on the quality of care they provide. The proposed additions include:
Additionally, the SNF Proposed Rule includes replacing the Skilled Nursing Facility 30-Day All-Cause Readmission Measure (SNFRM) with the Skilled Nursing Facility Within Stay Potentially Preventable Readmissions (SN FWS PPR) measure beginning with the FY 2028 program year and FY 2025 performance year. Proposed Changes to Waiver of Hearing under CMP CMS also proposes to eliminate the requirement that SNFs facing a civil money penalty waive their right to a hearing in writing, and instead, to treat a failure to submit a timely request for a hearing as a constructive waiver. IPF Proposed Rule The IPF Proposed Rule includes updates to the payment rates and QRP. Proposed Updates to the IPF Payment Rates CMS expects total payments to IPFs to increase by 1.9%, or $55 million, in FY 2024 relative to IPS payments in FY 2023. The 1.9% payment update reflects a 3% increase based on a proposed 2021-based market basket update of 3.2%, minus a productivity adjustment of 0.2% points. CMS also proposes an update to the outlier threshold so that the outlier payments remain at 2% of total payments. CMS estimates this outlier threshold update to result in a 1% decrease to aggregate payments. Proposed Updates to the IPF QRP The IPF Proposed Rule includes addition, deletion, and modification of performance measures to the IPF QRP, under which IPFs are subject to a 2% point reduction in their annual payment update if they fail to meet reporting requirements.
The SNF Proposed Rule is available here and the IPF Proposed Rule is available here. The CMS fact sheets on the SNF Proposed Rule can be found here and on the IPF Proposed Rule can be found here. Reporter, Kristy Lundy, Atlanta, +1 404 572 4645, klundy@kslaw.com. |
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On March 31, 2023, CMS released its calendar year 2024 Medicare Advantage annual capitation rates and finalized Part C and D payment policies. The policies included a revision of the Medicare Advantage risk adjustment model. CMS explained that the policies finalized reflect the agency’s efforts to meet the health care needs of all beneficiaries while improving the quality and long-term stability of the Medicare program. The rate announcement is available here, and a CMS fact sheet is available here. |