News & Insights


September 14, 2015

Health Headlines – September 14, 2015


D.C. District Court Holds that CMS’s Rigid Application of the “Similar Collection Efforts” Requirement Violates the Bad Debt Moratorium – In a case of first impression in the U.S. District Court for the District of Columbia, brought by King & Spalding on behalf of Mountain States Health Alliance, the court held that CMS’s disallowance of certain Medicare bad debts, which had been returned from a collection agency simply because non-Medicare accounts remained at the collection agency, violated the bad debt moratorium.  See Mountain States Health Alliance v. Burwell, Dec.  No. 13-cv-00641 (D.D.C. Sept. 10, 2015).  The court remanded the case back to the Provider Reimbursement Review Board (Board) with instructions “to apply the more flexible pre-Moratorium approach . . .  to determine whether the Providers engaged in ‘reasonable collection efforts’ notwithstanding their differential treatment of Medicare and non-Medicare bad debt.”  (Emphasis added.)  While the bad debt moratorium expired in FY 2012, the rationale announced in the decision would apply to all appeals of this issue from pre-2012 cost reporting periods.  The Providers were represented by King & Spalding partner Daniel J. Hettich. 

In Mountain States, the Providers subjected all of their accounts to a full 365 days of collection efforts, at which point, if no payments had been received on a Medicare account for at least 180 days, the Providers recalled those accounts from collection and claimed them for Medicare reimbursement.  Meanwhile, most of the Providers’ non-Medicare accounts remained at the collection agency.  The Providers’ collection agency expert explained that unique characteristics of Medicare accounts rendered them less susceptible to typical collection strategies and that the expense of engaging in those activities outweighed any potential return. 

Although the Providers’ Medicare administrative contractor (MAC) recognized that the Providers’ collection efforts had been “thorough,” it nonetheless disallowed all of their Medicare bad debts, totaling approximately $700,000, because the Providers did not also cease collection efforts on their non-Medicare bad debts.  Relying on CMS’s manual policy stating that a provider “must” refer its Medicare accounts to a collection agency whenever it refers its non-Medicare accounts of like amounts to a collection agency, the Board upheld the MAC’s disallowance.  The court, however, explained that the “denial of reimbursement was unreasonable because the rigid policy applied by the Board is inconsistent with the more flexible approach applied prior to the Bad Debt Moratorium,” in which the agency had found that disparate treatment of Medicare and non-Medicare accounts could be justified by sound business judgment.  

On a broader level, the Mountain States decision shows that the bad debt moratorium still has clout and that courts will not automatically accept the Secretary’s contention that her current policies are consistent with her pre-1987 policies. 

The Secretary has until November 9, 2015 to appeal the decision to the U.S. Court of Appeals for the D.C. Circuit.  A favorable decision in the D.C. Circuit would effectively set national policy on this issue. 

Reporter, Daniel J. Hettich, Washington, D.C., +1 202 626 9128,

DOJ Announces New Policies Focusing on Pursuing Individuals When Investigating Corporate Wrongdoing -- On September 9, 2015, the United States Department of Justice (DOJ) released a memorandum detailing policies to prioritize its goal of seeking accountability from individuals who perpetrate wrongdoing, in every DOJ investigation of corporate fraud and other misconduct.  According to the memorandum, focusing on holding individuals accountable is an effective way of deterring future wrongdoing, incentivizing changes in corporate behavior, ensuring that the proper parties are held responsible, and promoting the public’s confidence in our justice system. 

The memorandum, issued by Deputy Attorney General Sally Quillian Yates, stresses that these policies apply equally to civil and criminal investigations.  Deputy Attorney General Yates described six key steps the DOJ should take in every investigation of corporate misconduct, both civil and criminal, which are intended to strengthen the DOJ’s pursuit of individuals in investigating corporate wrongdoing:

    1. In order to qualify for any cooperation credit, corporations must provide all relevant facts and disclose all individuals responsible for the misconduct;
    2. Criminal and civil investigations should focus on individuals from the inception of the investigation;
    3. Criminal and civil attorneys investigating wrongdoing should be in routine communication with each other;
    4. The DOJ will not release culpable individuals from either civil or criminal liability when resolving a matter with a corporation absent extraordinary circumstances;
    5. DOJ attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases; and
    6. DOJ civil attorneys should base decisions on whether to bring suit against individuals on considerations beyond the individuals’ perceived ability to pay.

While not all of these measures are new, together they demonstrate the DOJ’s increasing focus on individuals in investigating corporate wrongdoing.  Healthcare entities facing an investigation, and those representing such entities, should bear in mind the potential liability of individuals in addition to that of the corporation.  At the very least, it is clear that the government will be focused on the individuals behind the conduct, and not just the entity. 

For a more in-depth discussion of the memorandum, see King & Spalding’s September 11, 2015, Client Alert.

Reporter, Scott Cameron, Sacramento, +1 415 318 1364,

MedPAC Suggests Streamlining CMS’s Proposed Performance-Based Physician Payment System – On September 8, 2015, the Medicare Payment Advisory Commission (MedPAC) released its comments to the proposed rule that will begin implementing the new Merit-Based Incentive Payment System (MIPS) for physician services, in which it cautions CMS not to over-complicate the quality measurement system.  Under MIPS, payments to physicians and other healthcare professionals will be adjusted based on performance measures beginning in calendar year 2019.  These performance measures would be based on quality, resource use, clinical practice improvement activities, and meaningful use of certified electronic health record technology, resulting in a composite score.  The composite score would then be measured against a performance threshold and the physician’s payments would be adjusted accordingly.  

While MedPAC supports physician performance measures, its comments caution CMS to avoid increasing the complexity of Medicare’s quality measurement systems.  Because of the resources required to monitor and evaluate individual physicians and then redistribute payments, MedPAC recommended a more streamlined approach to developing quality measurements.  MedPAC noted that for physicians organized in groups that assume clinical and financial accountability for their patients, performance assessments could be successfully based on outcome measures such as potentially avoidable hospital admissions, emergency department visits, and readmissions.  For physicians who are not responsible for a group of beneficiaries, the most that can realistically be achieved through any performance measurement framework like MIPS within the Medicare fee-for-service space, MedPAC argues, may only be able to identify “extreme and persistent outliers” among quality performance measures.  Thus, only the outliers would have their payments adjusted.  For this reason, MedPAC advocates for a “streamlined approach to the quality measurement system” that will permit a “more rational use of resources and effort for both CMS and providers.”

In addition to commenting on MIPS and quality measurement, MedPAC also submitted comments regarding, among other items, the proposed rule’s “alternative payment models,” physician self-referral updates, valuation of specific codes, and advance care planning services.  A detailed summary of the proposed rule is available in our prior Health Headlines article here.  The comment period expired on September 8, 2015, and publication of the final rule is expected by November 1, 2015.

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

CMS Releases Medicare Equity Plan to Reduce Health Disparities – On September 8, 2015, the CMS Office of Minority Health unveiled the CMS Equity Plan for Improving Quality in Medicare (Equity Plan), the first plan designed to address health equity issues in Medicare.  The plan was developed in collaboration with the University of Chicago, and focuses on six priority areas aimed at reducing health disparities. 

Specifically, the Equity Plan focuses on Medicare populations that often experience disproportionately high burdens of disease, lower quality of health care, and barriers to accessing health care.  Such populations include racial and ethnic minorities, sexual and gender minorities, individuals with disabilities, and those residing in rural areas.  The plan emphasizes increasing understanding and awareness of disparities, creating and sharing solutions, and accelerating implementation of effective actions.

The priorities of the Equity Plan include: (1) expanding the collection and reporting of standardized data, (2) integrating equity solutions across CMS programs, (3) developing approaches to reduce health disparities, (4) increasing the ability of the heath care work force to meet needs of vulnerable populations, (5) improving communication for individuals with limited English and individuals with disabilities, and (6) increasing physical accessibility of health care facilities.  To assess and track the Equity Plan’s progress, CMS plans to design a comprehensive evaluation process.

The Equity Plan is available by clicking here. The CMS press release is available by clicking here.

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

Also in the News

Final ACO Fraud Waiver Under OMB Review – The White House Office of Management and Budget (OMB) reported on September 9, 2015, that it began its review of the final rule (CMS-1439-F; RIN 0938-AR30), titled “Medicare Shared Savings Program; Final Waivers.”  The current waiver regulation, an interim rule (available here), is due to expire in November.   

Court Rules House Can Sue Administration Over ACA – In a September 9, 2015 opinion, the U.S. District Court for the District of Columbia ruled that the House of Representatives has standing to sue HHS Secretary Burwell and Secretary of the Treasury Jacob Lew for their departments’ use of allegedly unappropriated funds in a cost-sharing program used to support the implementation of the Affordable Care Act (ACA).  The court ruled that the House does not have standing to pursue claims that Secretary Lew improperly amended ACA by delaying and narrowing the scope of the employer mandate, since the claim concerns the implementation of a statute and not adherence to any specific constitutional requirement.  A copy of the decision is available by clicking here.

CMS Extends Comment Period for LTC Rule – CMS published a notice on September 11, 2015, reopening the comment period to the July 16, 2015, proposed rule that would update and revise the requirements for long term care (LTC) facilities participating in the Medicare and Medicaid programs.  In the notice, CMS explains that it has received inquiries from hospital associations and national industry organizations regarding the need for additional time due to the scope and complexity of the proposal, and states that it has decided to extend the comment period for 30 days to provide ample time for comments.  Comments are now due by October 14, 2015.

CMS Releases MLN Matters Article on Updates to Hospice Payment Rates, Cap, Wage Index and Prices for FY 2016 – On September 4, 2015, CMS released a MLN Matters article related to Change Request 9301/Transmittal 3445 directing Medicare’s Administrative Contractors to apply the new hospice payment rates for FY 2016.  The MLN Matters article lists the new hospice care payment rates for FY 2016, including the single routine home care rate for care provided from October 1, 2015 through December 31, 2015, the two-tiered payment system rate for routine home care services furnished on or after January 1, 2016, and the service intensity add-on beginning January 1, 2016.  The MLN Matters article also provides the aggregate cap value for the 2015 cap year ending October 31, 2015 ($27,382.63) and the hospice wage index for FY 2016.  The MLN Matters article is available by clicking 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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