News & Insights


October 17, 2022

Health Headlines – October 17, 2022

OIG Report Finds Texas May Have Claimed More Than $30 Million in Federal Funds for Medicaid Uncompensated Care Payments That Did Not Meet Federal and State Requirements – On September 29, 2022, OIG published a report of its findings summarizing its investigation into whether Texas properly claimed uncompensated care (UC) payments (the Report).  The Report by OIG found that Texas incorrectly claimed millions of dollars in Medicaid UC payments that did not meet federal and state requirements because the State did not refund the full federal share of overpayments, did not collect identified overpayments, and did not reduce hospitals’ actual uncompensated care costs by Medicare payments.

In its September 2022 report, OIG reviewed UC payments Texas distributed for costs incurred between December 12, 2011, and September 30, 2016.  OIG found that Texas incorrectly claimed $18.90 million.  This figure includes $12.91 million that Texas did not refund the full federal share of overpayments and $5.99 million that it did not collect identified overpayments.  Specifically, the state agency made overpayments to three public hospitals totaling $30.89 million.  Due to a recording error, the state agency returned a smaller amount of overpayments to the federal government rather the correct total.  The state agency also failed to collect $5.99 million in overpayments it made to eight hospitals.  The Report listed high personnel turnover as the cause of the inadvertent accounting failure.

The Report also found that the state agency did not reduce hospitals’ actual UC costs by Medicare payments so the state may have also incorrectly claimed $33.78 million.  In January 2010, CMS issued FAQs 33 and 34 in its “Additional Information on the DSH Reporting and Audit Requirements” that directed states to decrease hospital provider costs by private insurance and Medicare payments when totaling the hospital-specific limits. After litigation, CMS withdrew FAQs 33 and 34 in December 2018.  The state agency failed to reduce the UC costs by Medicare payments received for dually eligible persons during October 1, 2013, to September 30, 2016, resulting in overpayments to some hospitals.  The state agency disagreed with OIG’s finding regarding this issue and asserted that the state agency acted properly.  As a result of the State’s response to the draft report, OIG amended its recommendation from recoupment of funds to working with CMS to determine the correct course of action in figuring out whether the $33.78 million in UC payments hospitals retained due to the failure to consider the Medicare payments should be recouped.  If so, OIG recommends that the state agency either refund the related federal share of $19.66 million to the federal government or recoup and redistribute the funds to hospitals that had unmet UC costs. 

OIG also recommends the state agency refund $11.05 million to the federal government for the underreported UC overpayments. Additionally, OIG advises the agency to follow the CMS-approved methodology for calculating actual UC costs when reconciling initial UC payments with providers’ actual UC costs, including reducing UC costs by Medicare payments providers receive. Finally, OIG recommends that the state agency establish review procedures for overpayments to ensure that they are accurately entered into the state agency’s accounting system and returned to the federal government.

The full text of the Report is available here.

Reporter, Kasey Ashford, Washington D.C., +1 202 626 2906,

CMS Begins Reprocessing Payment to 340B Hospitals Following Federal Court Ruling – On October 13, 2022, CMS announced that it will revert to paying the statutory rate of average sales price (ASP) plus 6% for 340B-acquired drugs on a prospective basis.  This announcement comes on the heels of a September 28, 2022, federal district court ruling that vacated CMS’s 2022 OPPS Final Rule, which paid hospitals ASP minus 22.5% for 340B drugs.

According to CMS, Medicare contractors are instructed to upload revised OPPS drug files that will apply the ASP plus 6% rate to 340B-acquired drugs for the remainder of the year.  CMS also stated that its contractors will similarly reprocess claims that were underpaid paid on or after September 28, 2022.  Medicare contractors have gone a step further to instruct providers to “submit adjustments on any claim submitted with the modifier JG with date of service in 2022 that was paid prior to September 28, 2022.  Providers should submit the Type of Bill (TOB) xx7 with condition code D9 and remarks indicating “340B adjustment.” Timely filing rules will apply when submitting adjustments, so we recommend adjusting as soon as possible. If adjustments are submitted beyond timely filing, then the TOB will need to be xxQ with the appropriate coding and the remarks indicating ‘340B adjustment.’”

The district court is currently reviewing motions concerning a retrospective remedy for hospitals underpaid by the same defective 340B policy contained in OPPS rules dating back to CY 2018. 

CMS’s announcement is available here.  An example Medicare contractor announcement is available here

Reporter, Michael L. LaBattaglia, Washington, D.C., +1 202 626 5579,

CMS Announces Resources and Flexibility in Response to Hurricane Ian for Florida and South Carolina – On September 27, 2022 and October 3, 2022, CMS announced additional resources and flexibilities available for Florida and South Carolina in response to the aftermath of Hurricane Ian.

Following the President’s declaration of a state of emergency in both Florida and South Carolina, HHS subsequently determined that a public health emergency existed and made available the following resources and waivers to ensure that hospitals and other facilities are able to continue to operate without interruption and provide access to care to those impacted by Hurricane Ian:

  • Waivers.  CMS waivers are available to providers in Florida and South Carolina who have been impacted by Hurricane Ian.  Those emergency waivers can be found here, and relate to flexibilities such as a replacement of prescription refills that may have been damaged and waiver of the face-to-face requirement for certain durable medical equipment products, among others.
  • Medicaid and CHIP Support.  CMS has developed an inventory of Medicaid and Children’s Health Insurance Program (CHIP) flexibilities and authorities to support Medicaid and CHIP operations.  The disaster toolkit can be found here and the Medicaid and CHIP flexibilities and authorities here.
  • Dialysis Care.  CMS has activated its Kidney Community Emergency Response (KCER) Program and is working with End-Stage Renal Disease (ESRD) Networks 6 (Georgia, North Carolina, and South Carolina) and 7 (Florida) to assess the status of dialysis facilities in potentially impacted areas.  Further information regarding KCER is available here.

The resources and flexibilities provided by CMS for Florida and South Carolina are addressed on CMS’s website here and here, respectively.  

Reporter, Christopher C. Jew, Los Angeles, +1 213 443 4336,


HHS Extends COVID-19 Public Health Emergency —On October 13, 2022, the COVID-19 public health emergency declaration was extended for ninety (90) additional days. This emergency declaration grants the Biden administration emergency powers to respond to the COVID-19 pandemic, including allowing for swift approval of treatments for the disease. This declaration was first launched in 2020 and has been renewed in ninety-day increments since that time. The public declaration of the renewal from HHS can be read here.

King & Spalding Webinar: The Updated OIG Model CIAs – What All Healthcare Organizations Need to Know— On Tuesday, October 25, from 12 noon to 1:00 P.M. ET, King & Spalding is hosting a webinar titled, “The Updated OIG Model CIAs – What All Healthcare Organizations Need to Know.”  The webinar will cover the recent OIG revisions to its Integrity Agreement (IA) and Corporate Integrity Agreement (CIA) model language, which impact CIA-obligated providers and reflect the agency’s evolving expectations concerning compliance program design. The panel will explore OIG’s recent changes to its model language, including changes related to the Compliance Committee’s role, extrapolation in Independent Review Organization (IRO) reviews, exclusion screening obligations, and focus on Stark and Anti-Kickback Statute compliance controls. The panel will also cover practical strategies to manage risk and promote compliance with federal healthcare program requirements.

Registration is free. Additional information can be found here.