backOIG Issues Advisory Opinion Permitting Waiver of Certain Cost-Sharing Obligations for Children’s Hospital Patients — On February 4, 2022, OIG issued Advisory Opinion No. 22-02 in which it responded to a request for an advisory opinion submitted by a hospital system that operates a children’s hospital (Requestor) regarding a proposed subsidization of certain cost-sharing obligations with respect to qualifying patients of Requestor (the Proposed Arrangement). As discussed in further detail below, OIG determined that the Proposed Arrangement could generate prohibited remuneration under the federal Anti-Kickback Statute and the beneficiary inducement provision of the civil monetary penalties law (CMP Law). However, OIG ultimately concluded that it would not impose administrative sanctions upon Requestor because the Proposed Arrangement presents a low risk of fraud and abuse.
Factual Background
Requestor is a tax-exempt organization that operates multiple hospitals, including a children’s hospital (the Children’s Hospital). Most federal healthcare program beneficiaries treated at the Children’s Hospital do not incur out-of-pocket expenses related to their care because they are under the age of 18 and covered by Medicaid, which does not impose cost-sharing obligations for Medicaid-billable items and services provided to children.
Under the Proposed Arrangement, two individuals (Donor A and Donor B), will leave a monetary donation to the Children’s Hospital, from which the parties will establish a restricted endowment fund (the Fund) that would: (i) be subject to specific rules governing how Requestor can use monies from the Fund; and (ii) be used to subsidize patient bills for families with children who have an established treatment relationship with physicians at the Children’s Hospital and who receive treatment services in the cancer, cardiac, or neurosurgical programs at the Children’s Hospital (Qualified Families). Under the Proposed Arrangement, Requestor and the Fund will pay all out-of-pocket costs owed to Requestor incurred by Qualified Families for their children’s medical care from the above specified programs. Requestor would also be required to make certain reductions in a Qualified Family’s bill before the Fund may be used to subsidize that bill. If there are remaining sums in the Fund after monies are allocated for all Qualified Families that receive cancer, cardiac, or neurosurgical treatment services, Requestor may use monies in the Fund to pay for Qualified Families’ out-of-pocket expenses for other services provided at the Children’s Hospital.
Requestor certified that it would not advertise the existence of the Proposed Arrangement. Additionally, Requestor certified that the criteria for clinical determinations regarding the appropriateness of inpatient or outpatient care would not change in light of the Proposed Arrangement, and that it would not consider insurance coverage, type of insurance, or a patient’s diagnosis or medical condition in determining which families are Qualified Families.
Legal Analysis
OIG determined that the Proposed Arrangement could generate prohibited remuneration under the federal Anti-Kickback Statute and the beneficiary inducement provision of the CMP Law. However, OIG stated that it would not impose administrative sanctions on Requestor in connection with the Proposed Arrangement because it presents a minimal risk of fraud and abuse. In coming to this conclusion, OIG relied upon the following factors:
-
The Proposed Arrangement would cover care-related expenses incurred by all Qualified Families, regardless of payor, for the treatment of their children at the Children’s Hospital.
-
The Proposed Arrangement would not be advertised, which reduces risks typically associated with cost-sharing waivers, such as over-utilization and inappropriate steering.
-
Unbilled cost-sharing amounts under the Proposed Arrangement will not be reported as bad debt on cost-reports, nor will those amounts be shifted to third-party payors, including federal health care programs, which reduces the risk that the Proposed Arrangement would contribute to increased federal health care program costs.
-
Requestor would not use the Proposed Arrangement to attract highly profitable patients.
As is typical, OIG stated that Advisory Opinion No. 22-02 is limited in scope to the Proposed Arrangement. However, this opinion provides guidance as to how OIG might respond to similar requests. The OIG Opinion is available here.
Reporter, Michelle Huntsman, Houston, +1 713 751 3211, mhuntsman@kslaw.com.
OIG Issues Advisory Opinion for Payment of Tuition for CNA Certification for HHA Employees — On February 14, 2022, OIG issued Advisory Opinion No. 22-03 analyzing a proposed arrangement under which home health agency (HHA) owners would pay tuition costs of nurse aid certification programs for new employees who are likely to be parents or relatives of medically-fragile children who qualify for Medicaid HHA services. As discussed in further detail below, OIG finds that the proposed arrangement would not generate prohibited remuneration under the federal Anti-Kickback Statute or the civil monetary penalties law (CMP Law), and therefore OIG would not impose administrative sanctions in connection with the arrangement.
Factual Background
The Advisory Opinion was requested by owners of HHAs (Requestors) located in a state that has a plan to provide Medicaid reimbursement for HHA services provided by a parent or other relative to a medically-fragile child covered by Medicaid if the parent or relative is (i) certified in the state as a certified nurse aid (CNA) and (ii) employed by an HHA. Under the proposed arrangement, Requestors would pay tuition costs for new employees hired to work as CNAs who have not yet received CNA certification. Requestors certified the following with respect to the proposed arrangement:
-
The vast majority of participants would be parents of medically-fragile children covered by Medicaid. However, tuition reimbursement would be made available to all new employees hired to provide CNA services. Any advertising of the benefit would not reference the potential to provide HHA services to the new employee’s children or relatives.
-
All participating employees would be bona fide employees of Requestors.
-
Requestors would pay tuition costs directly to the school operating the certification program.
-
Continued employment would be contingent upon successfully receiving CNA certification.
-
Employees who receive CNA certification but do not remain employed by Requestors for at least 1 year thereafter would be required to reimburse the HHA a prorated portion of the tuition costs, determined based on their actual length of service.
-
Reimbursement would be solely dependent upon employment status and not the ability to refer patients. An employee with a child or relative eligible to receive HHA services would not be terminated if the services are obtained elsewhere.
Analysis
OIG finds that Requestors’ payment of salaries and tuition costs could induce parents or relatives of medically-fragile children to refer such children to Requestors’ HHAs for services reimbursable by federal healthcare programs, thereby implicating both the Anti-Kickback Statute, 42 U.S.C. § 1320-7b, and the beneficiary inducement prohibition of the CMP Law, 42 U.S.C. § 1320a-7a(a)(5). However, OIG concludes that the salaries and tuition costs constitute “amount[s] paid by an employer to an employee . . . for employment in the furnishing of any item or service for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care programs” and are therefore permissible under the Anti-Kickback Statute’s statutory exception and regulatory safe harbor for employees. See 42 C.F.R. § 1001.952(i). OIG reached this conclusion based on Requestors’ certification that participating employees would be bona fide employees from the time they are hired (i.e., before and after receiving CNA certification). OIG further concludes that the arrangement would not violate the beneficiary inducement prohibition of the CMP Law because the CMP Law contains an exception for any practice permitted under an exception to the federal Anti-Kickback Statute or its safe harbor regulations. Because the proposed arrangement would not generate prohibited remuneration under the federal Anti-Kickback Statute or the CMP Law, OIG would not impose administrative sanctions in connection with the arrangement.
The Advisory Opinion is limited in scope to the proposed arrangement and can only be relied upon by Requestors. However, it provides a helpful indication of how OIG might respond to similar requests.
The Advisory Opinion is available here.
Reporter, J. Gardner Armsby, Atlanta, +1 404 572 2760, garmsby@kslaw.com.
New York District Court Dismisses COVID-19 Fraud Related Whistleblower Suit Against Nursing Facility – On February 7, 2022, the Northern District of New York dismissed a qui tam complaint against a New York nursing facility operator, Kingston NH Operations LLC, which operates Ten Broeck Center (TBC). The relator, a former employee, claimed that the facility inadequately cared for Medicaid and Medicare beneficiaries during the COVID-19 pandemic. Among other things, the relator alleged that the facility did not comply with state-issued mask mandates and social distancing guidelines, downplayed the severity of the spread of COVID-19 within the facility, and improperly terminated her employment in retaliation for calling attention to the improper conduct. The government declined to intervene. The district court’s decision implicates a longstanding circuit split over how Rule 9(b) applies to False Claims Act actions and analyzes the question of whether Rule 9(b) requires a relator to identify specific examples of false claims.
In moving to dismiss, the facility argued that the relator’s complaint failed to satisfy Fed. R. Civ. P. 9(b)’s heightened pleading standard because to the relator did not identify “who submitted the false claims, the dates of service, dates of [the claims’] submission, the patient for whom the claim was allegedly submitted, how the claim was false, to whom the statement was made, when the statement was made, or any other [relevant] facts . . ..” In opposition to the retaliation claims, the facility also argued that the relator failed to allege facts plausibly suggesting that she engaged in a protected activity as required under the FCA and the New York FCA, and that the relator was not a covered employee within the meaning of N.Y. Labor Law § 741. Finally, the facility contended that the complaint alleged no facts plausibly suggesting that the facility’s conduct presented either a “substantial and specific danger to public health or safety or a significant threat to the health of a specific patient.”
The court ruled in favor of the facility. Applying the rule adopted by the Second Circuit, the court held that Fed. R. Civ. P. 9(b) “does not require that every qui tam complaint provide details of actual bills or invoices submitted to the government.” Nevertheless, the court went on, a relator must allege facts that lead to a “strong [inference] that specific claims were indeed submitted and that information about [the details of] the claims submitted are peculiarly within the opposing party’s knowledge.” Further, the court reasoned, a relator must allege a factual nexus between the improper conduct and the submission of a false claim. Although relator’s complaint provided extensive facts as to how TBC staff and residents defied state-issued mask mandates and social distancing guidelines, relator “merely stated a set of circumstances and ask[ed] the Court to connect the dots by assuming that defendant submitted false claims.” Specifically, the court found relator’s complaint lacked the following information: (1) the identity or position of the employee(s) who allegedly submitted fraudulent claims or claims containing false statements; (2) the number of fraudulent claims or claims containing false statements and their respective dollar amounts; and (3) any personal knowledge as to the existence of prior or future fraudulent billing practices. The court also noted that “[m]ateriality must also ‘be pleaded with particularity under [Fed. R. Civ. P.] 9(b)’” and relator failed to allege any facts that plausibly suggest even a single claim that defendant had submitted to Medicaid or Medicare, leaving the court unable to assess materiality of any submitted claim. Based on this reasoning, the court ultimately dismissed relator’s FCA and NYFCA claims.
The court also dismissed relator’s retaliation claims, reasoning that while relator sufficiently alleged facts plausibly suggesting her good faith belief that she was engaged in a protected activity, she failed to allege facts plausibly suggesting that an employee in a similar circumstance would have believed noncompliance with mask mandates could possibly suggest that fraudulent claims or claims containing false statements had been submitted to Medicaid. Since the court dismissed all of relator’s claims over which it had original jurisdiction except for one state law claim brought under N.Y. Labor Law § 741, the court had discretion on whether it would exercise supplemental jurisdiction for the remaining claim, but it ultimately declined.
In another case, Johnson v. Bethany Hospice and Palliative Care, which also raises the question of how Rule 9(b) applies to FCA actions, the Supreme Court recently called for the views of the Solicitor General.
The decision from the Northern District of New York can be found here.
Reporter, Jasmine Becerra, Atlanta, +1 404 572 3537, jbecerra@kslaw.com
COMPLIANCE CORNER
Compliance Considerations for Preparing to Unwind Reliance on Public Health Emergency Waivers — When COVID-19 was declared a Public Health Emergency (PHE), the Secretary of HHS was authorized to waive or modify certain Medicare, Medicaid, Children’s Health Insurance Program, HIPAA, and EMTALA requirements. Many healthcare organizations employed these waivers or modifications by implementing temporary policies and procedures to ensure their ability to rapidly adapt to changing patient volumes and demand for providers, supplies, and equipment during the PHE. Because many of the PHE waivers and flexibilities relaxed rules related to high-priority areas for CMS, King & Spalding expects that investigations and enforcement will begin around flexibilities that will be rolled back with the expiration of the PHE.
The Secretary has waived or modified nearly 200 healthcare regulatory requirements in connection with the PHE. Most of the waivers were retroactive to March 1, 2020, while others were effective later in 2021 as the PHE continued to evolve. While some waivers, such as those associated with certain aspects of telemedicine, may become permanent after appropriate rulemaking processes, many of the waivers or modifications are expected to end upon the expiration of the PHE. Some waivers or modifications have already concluded or were already limited in time and scope when they were issued.
Because variants of COVID-19 continue to develop and many hospitals remain overcrowded and understaffed, the PHE has been extended into 2022. However, the PHE and therefore the CMS waivers are not expected to last indefinitely. Because many waivers and modifications relaxed rules associated with the Conditions of Participation, provider enrollment or licensure, and compliance with the Stark Law, King & Spalding anticipates increased investigations and enforcement of the rules at the conclusion of the PHE. Given the speed and urgency with which healthcare organizations had to respond to the pandemic, they may not have a comprehensive view into which waivers they are relying upon for their current policies and procedures. As a first step, healthcare organizations should inventory the waivers they have implemented.
In preparation for the expiration of the PHE, organizations should also develop a plan to unwind the interim policies and procedures they put in place when the regulatory waivers and flexibilities were established. Organizations’ plans to unwind the steps taken to implement the waivers should include:
-
a list of staff members who are responsible for each waiver;
-
the policies, procedures, forms, and communication mechanisms that changed because of each waiver;
-
a timeline for reestablishing all regulatory requirements; and
-
a review of each regulatory standard to ensure reinstituted policies and procedures meet all recent updates to previously-waived regulations (for example, some telehealth waivers will not revert to their original state but will either retain the waived components of the original regulation or some altered version of waived rules).
To assist organizations in this assessment and planning process, King & Spalding’s healthcare compliance practice has developed a unique PHE Assessment Toolkit. The Toolkit is designed to help healthcare entities identify which PHE waivers they implemented and to provide direction on how to unwind them upon the conclusion of the PHE. The Toolkit enables healthcare organizations to evaluate each potential regulatory waiver or modification and determine whether it was implemented and in which areas or departments. The Toolkit also provides a framework for organizations to establish the necessary steps to retract its provisional policies and procedures and reinstitute those that comply with federal healthcare laws, rules, and regulations. Using the Toolkit, healthcare organizations can sort by the level of risk associated with each waiver, so they can prioritize their activities around unwinding the processes they implemented when they employed the waiver. For example, there are 18 waivers associated with the Stark Law. These waivers are high risk for healthcare organizations. One example is the ability of healthcare entities to pay a physician above or below FMV for personally-performed services to the entity. Similarly, certain Stark Law sanctions have been waived in the context of physician referrals made by a physician owner of a hospital for specific exceptions related to ownership and investment interests.
We welcome the opportunity to discuss these issues and how to prepare your organization for unwinding the waivers implemented during the PHE. Please reach out directly to Andi Bosshart with questions and comments.
Reporters, Andi Bosshart, Atlanta, +1 404 572 2657, abosshart@kslaw.com, and Rebecca Gittelson, Atlanta, + 1 404 572 4679, rgittelson@kslaw.com.
Editors: Christopher P. Kenny and Catherine (Kate) S. Stern
Issue Editors: ArianaFuller and Gardner Armsby