News & Insights


October 6, 2014

Health Headlines – October 6, 2014


OIG Releases Proposed Rule Adding New Safe Harbors to the Anti-Kickback Statute – Last week, the HHS OIG released a proposed rule published in the October 3 Federal Register that would add new safe harbors to the Anti-Kickback Statute and expand the list of conduct exempt from civil monetary penalties (CMP). Comments are due by December 2, 2014. The proposed new safe harbors cover (1) pharmacies offering Part D cost-sharing waivers, (2) state or municipal-owned organizations offering cost-sharing waivers for emergency ambulance services, (3) remuneration between Medicare Advantage organizations and federally qualified health centers, (4) manufacturer discounts for drugs provided through the Medicare Coverage Gap Discount Program, and (5) certain free or discounted local transportation services that meet specified criteria. The OIG also proposed a technical correction to the safe harbor for referral services located at 42 C.F.R. § 1001.952(f).

In expanding the list of conduct exempt from CMP, the OIG proposed to amend the definition of remuneration to create certain statutory exceptions. The proposed exceptions cover (1) copayment reductions for certain hospital outpatient services, (2) remuneration that poses a low risk of harm while promoting access to care, (3) coupons, rebates and other retailer rewards programs that meet specific requirements, (4) remuneration offered to financially needy individuals, and (5) copay waivers for the first fill of generic drugs. The OIG also proposed to codify the gainsharing CMP provision in 42 U.S.C. § 1320a-7a(b).

The proposals would codify changes originally included in the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003, as well as the Affordable Care Act. Comments should be submitted no later than December 2, 2014, at 5:00 p.m. Eastern Standard Time.

Reporter, Paige Fillingame, Houston, +1 713 615 7632,

CMS Publishes Open Payments Data Detailing Payments and Transfers of Value Provided by Life Sciences Manufacturers to Physicians and Teaching Hospitals – On September 30, 2014, CMS published data regarding payments and transfers of value that pharmaceutical, biologic, and medical device manufacturers provided to U.S. physicians and teaching hospitals during the period August 1 to December 31, 2013.  Manufacturers were required to report the data to CMS earlier this year pursuant to the Physician Payments Sunshine Act, enacted as part of the Affordable Care Act. 

The published data includes information about consulting fees, speaker fees, research payments, royalty payments, grants, meals, travel and lodging expenses, educational items, and other payments and items of value that manufacturers provided directly or indirectly to U.S. physicians and teaching hospitals during the reporting period, subject to some exceptions.  The published data includes a total of 4.4 million records submitted by 1,419 manufacturers, representing interactions with approximately 546,000 physicians and 1,360 teaching hospitals, and comprising approximately $3.5 billion. 

Approximately 40 percent of the published records are de-identified in that they do not identify the physician involved but provide other details of the associated payment or transfer of value (e.g., value, date, nature, etc.).  CMS de-identified those records due to concerns in matching the physician identifiers that manufacturers reported with the agency’s identifiers for those individuals.  CMS expects to publish physician identifiers for the impacted data sometime in 2015 after it resolves the matching issue. 

Notably, the published data does not include data that was disputed by physicians and teaching hospitals during the so-called 45-day covered recipient review period if the dispute was not resolved by the end of September 11 (which marked the end of the 45-day review period).  The publication also does not include data associated with certain research and development payments for which the law permits a delay in publication (intended to preserve the confidentiality of certain research activities and product development projects).  The published data is available for viewing and download on the CMS Open Payments website, available here.
Reporter, Brian Bohnenkamp, Washington, DC, + 1 202 626 35413,

CMS Issues 2013 RAC Report to Congress – On September 29, 2014, CMS released the Fiscal Year (FY) 2013 Recovery Audit Contractor (RAC) report. According to the report, RACs collected $3.65 billion in Medicare overpayments during FY 2013. In addition, the report stated that RACs prevented $22.3 million in improper payments from being made through an 11 state prepayment review demonstration program. RACs also identified $102.4 million in underpayments that were returned to providers.

The report explained that RACs returned $3.03 billion to the Medicare trust fund during FY 2013 after taking into consideration costs to oversee the RAC program, underpayment determinations, and appeal reversals.  Notably, the Region C RAC, Connolly Consulting, had the highest number of corrections in terms of both overpayments and underpayments.

Over 94 percent of overpayments identified were from inpatient hospital claims, and many of the top overpayment determinations in FY 2013 were due to short-stay inpatient hospital admissions. The report acknowledged that increased appeals for these types of claims have contributed to backlogs at the Office of Medicare Hearings and Appeals (OMHA), the agency that oversees the third level of appeal.

According to the report, in FY 2013, providers initially appealed 500,629 claims, or 30.7 percent of all overpayment determinations. Of the total number of claims appealed, 151,645 claims were overturned in favor of providers. Although the report states that provider wins account for only 18.1 percent of all appeals, appealed claims may have been counted as a claim multiple times by CMS if the claim had multiple appeal decisions rendered during FY 2013, thus likely skewing resulting percentages.  Accordingly, the ultimate success rate for providers is likely higher than the reported 18.1 percent figure. 

The full report is available here. 

Reporter, Lauren S. Gennett, Atlanta, + 1 404 572 3592,

CMS Issues New Cost Reporting Instructions

CMS recently released a transmittal updating Chapter 40 of the Provider Reimbursement Manual and the Hospital and Hospital Health Care Complex Cost Report (Form CMS-2552-10).  The changes are applicable for cost reporting periods ending on or after June 30, 2014.  While many provisions in Chapter 40 remain unchanged, the transmittal provides new instructions for certain worksheets in Form CMS-2552-10, including worksheets D-5, E-3, E Part A, S-2, and S-3.  The updated Form CMS-2552-10 is available here.
Reporter, Paige Fillingame, Houston, +1 713 615 7632,


FDA Issues Draft Guidance on Regulatory Oversight of Lab Tests – On September 30th, the Food and Drug Administration (FDA) released draft guidance concerning the proposed oversight framework for regulating laboratory developed tests. To view the draft guidance, click here. King & Spalding will distribute a more detailed description of the draft guidance in an upcoming client alert.

MACs Begin Sending Fingerprint Requests – Medicare Administrative Contractors (MACs) have begun sending fingerprint request letters pursuant to CMS’s recently implemented fingerprint-based background requirements. These letters, which will be sent to the correspondence and special payment addresses on file with Medicare, will list all owners who are required to be fingerprinted. If identified individuals are not fingerprinted within 30 days from the date of the letter, the provider or supplier may face denial of its Medicare enrollment application or revocation of Medicare billing privileges. More information is available here.

 The content of this publication and any attachments are not intended to be and should not be relied upon as legal advice.

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