News & Insights


September 26, 2016

Health Headlines – September 26, 2016

District Court Denies Stay in Litigation Over Medicare Appeals Backlog – On September 19, 2016, the U.S. District Court for the District of Columbia rejected a request by HHS to stay proceedings in litigation brought by the American Hospital Association and several providers seeking to compel the Secretary to adjudicate Medicare claims appeals in accordance with statutory timeframes.  While the District Court was “reluctant to intervene,” it recognized that the backlog of delays had only worsened since plaintiffs’ filing of the action in May 2014.  The District Court denied the Secretary’s request to stay the proceedings through September 30, 2017, concluding that the Secretary’s proposed administrative and legislative efforts were “unlikely to turn the tide.”

As previously reported, the District Court denied relief and dismissed the action for lack of jurisdiction in December 2014, but that decision was overturned earlier this year by the U.S. Court of Appeals for the District of Columbia Circuit, which remanded the case to the District Court to determine whether there were compelling grounds to issue a writ of mandamus.  On remand, the Secretary moved to stay the action until September 30, 2017 -- the close of the next full appropriations cycle. 

In its decision on the Secretary’s motion to stay, the District Court structures its analysis around the D.C. Circuit’s factors for and against mandamus, and the “critical consideration of whether the legislative and executive branches are making ‘significant progress toward a solution,’” based on the fact that whether to grant the Secretary’s motion involves overlapping considerations with those of whether to grant mandamus relief.  After brief consideration of factors weighing against mandamus, such as the extraordinary and intrusive nature of the writ and the Secretary’s good faith efforts to reduce delays, and factors weighing in favor of mandamus, such as the real impact the delays have on human welfare, the District Court focuses on “whether the administrative and legislative fixes offered in the Secretary’s briefing constitute progress sufficient to warrant pausing this litigation until September 30, 2017.” 

With respect to administrative fixes, the District Court runs through a number of “impressive-sounding” administrative action items, including settlement-conference facilitation efforts and changes to the RAC program, but ultimately recognizes that, even if each fix is implemented according to plan, “the OMHA backlog will still grow every year between FY2016 and FY2020 – from 757,090 to 1,003,444 appeals.”  Thus, the Court concludes that the administrative fixes do not clear the bar for significant progress, stating that “‘significant progress toward a solution cannot simply mean that things get worse more slowly than they would otherwise.” 

With respect to legislative fixes, the District Court is likewise not persuaded that the President’s FY 2017 Budget or policy reforms included in the Audit & Appeals Fairness, Integrity, and Reforms in Medicare Act of 2015 (AFIRM Act) demonstrate significant progress, citing lack of Congressional action on the FY 2017 budget and twenty-one month lull in activity with respect to the AFIRM Act. 

A status conference with the parties is scheduled for October 3, 2016.  For a copy of the opinion, please click here

Meanwhile, in another opinion issued the same day, the District Court granted the Secretary’s motion to dismiss an action by Empire Health Foundation and two of its hospitals seeking judicial review of a remand order by the Provider Reimbursement Review Board (PRRB).  In that matter, Empire Health challenged the Medicare disproportionate share payments to the hospitals for fiscal years 2005 through 2007.  In October 2015, the PRRB remanded the dispute to the fiscal intermediary for recalculation pursuant to a 2010 ruling by CMS (CMS Ruling 1498-R) that attempted to fix the Medicare-Supplemental Security Income fraction portion of the DSH calculation, and instructed that any pending reimbursement appeals related to that issue be sent back to fiscal intermediaries for recalculation.  Among other things, Empire Health argued that the remand order was a jurisdictional dismissal constituting a final agency decision.  The District Court found, however, that the remand order did not constitute a final administrative decision from HHS and ruled that the hospitals could not obtain judicial review until completing the administrative appeal process. 

For a copy of the opinion, please click here

Reporter, Kerrie S. Howze, Atlanta, +1 404 572 3594,

Florida Federal District Court Dismisses Plaintiff’s Qui Tam Action Against Hospice Providers
On September 22, 2016, the United States District Court for the Middle District of Florida granted defendant hospice providers’ motions to dismiss plaintiff-relator’s claims under the False Claims Act, Florida’s False Claims Act, and claims for conspiracy and retaliation.  United States v. LifePath, Inc., 2016 WL 5239863, Case No. 8:10-cv-0161-T-30TGW (M.D. Fla. September 22, 2016).  

Plaintiff, a licensed clinical social worker previously employed by one of the defendants, alleged that defendants had conspired to defraud the government by submitting claims to Medicare for hospice care they did not provide or for hospice care they provided to patients who were ineligible for that care because they were not terminally ill.  Id. at * 1.  Plaintiff filed her qui tam FCA lawsuit under seal in 2010.  After investigating her allegations, the United States and the State of Florida declined to intervene in the lawsuit.  Id. at * 4.  Plaintiff alleged causes of action for: (1) violation of the False Claims Act and Florida’s parallel statute, Fla. Stat. § 66.082(2)(a)-(b); (2) conspiracy to violate the False Claims Act and Florida’s False Claims Act; and (3) retaliation and employment discrimination against plaintiff’s former employer.  Id.

The court held that plaintiff fell well short of meeting the heightened pleading requirement under Fed. R. Civ. Proc. 9(b) for claims alleging fraud because plaintiff failed to identify a single claim submitted to the government let alone a false one.  Id. * 7.  The court noted that plaintiff failed to allege “facts as to time, place, and substance of the defendant’s alleged fraud” – that is, a fraudulent claim.  Id. (citing United States ex rel. Clausen v. Laboratory Corp. of America, Inc., 290 F.3d 1301, 1310 (11th Cir. 2002).  Accordingly, the court dismissed plaintiff’s claims for violation of the False Claims Act and Florida’s False Claims Act.  Id. * 8.  The court also dismissed plaintiff’s claims for conspiracy to violate the False Claims Act and Florida’s False Claims Act because plaintiff’s failure to plead the existence of a false claim, a necessary element in establishing her claim for conspiracy, necessarily meant that, as a matter of law, plaintiff could not prevail.  Id. at * 9.Lastly, the court found that plaintiff’s allegations failed to state a claim for retaliation and discrimination because, “accepted as true, the allegations fail to allege a necessary element of the claim – namely, that [plaintiff] engaged in a protected activity, …”  Id.  The court explained that while plaintiff alleged that she objected to unethical medical practices, she failed to allege “that she objected to fraudulent medical practices.”  Id. (italics in original). 

Finally, the court found that leave to amend would be futile given that the court had already granted leave to amend twice, and plaintiff had repeated chances to cure the deficiencies in her complaint.  Id. at * 11. Accordingly, the court ordered that the case be dismissed with prejudice.
Reporter, John Whittaker, Sacramento, +1 916 321 4808,

CMS and OIG Propose First Major Medicaid Fraud Control Program Changes Since 1978 – On September 20, 2016, CMS and the OIG jointly published a proposed rule, available here, to amend the largely unchanged 1978 regulation governing State Medicaid Fraud Control Units (MFCUs).  Since the initial issuance of the rule, statutory changes and a number of program and policy changes have occurred.  CMS and the OIG propose to incorporate the statutory changes into the regulation and align the rule with practices and policies that have developed over the last 30 years.  Because the majority of the proposed rule simply codifies longstanding existing provisions and practices, industry impact is likely minimal.  The rule does, however, contain provisions beyond existing practices that modify staffing requirements and expand MFCU prosecutorial authority.  Comments on the proposed rule are due by November 21, 2016.    
Statutory Changes – The proposed rule incorporates several statutory changes that have been enacted since 1977.  The rule purports to:

  • Raise the Federal matching rate for ongoing operating costs from 50 to 75 percent;

  • Establish a Medicaid State plan requirement that states operate effective MFCUs;

  • Create standards regarding MFCU operation;

  • Permit MFCUs to seek approval from the Inspector General to investigate and prosecute violations of State law related to health care fraud under any Federal health care program, if it is primarily related to Medicaid; and

  • Provide MFCUs the option to investigate and prosecute patient abuse and neglect, regardless of whether the facility received Medicaid payments.

Staffing Requirements – The existing regulations prohibit federal fiscal participation (FFP) in expenditures for any management, investigative, professional or legal function that is not performed by a full-time employee.  In accordance with current OIG policy, the proposed rule would allow FFP for any full-time or part-time employee who devotes “exclusive effort” to the MFCU.  The proposed rule defines “exclusive effort” as a duty within the MFCU intended to last for at least one year.  MFCU employees on detail or assignment from another agency would not be permitted to allocate time to both the MFCU and the employee’s home agency.  However, MFCU professional employees would be permitted to obtain outside employment or perform temporary assignments with some restriction.  The rule clarifies that investigation and prosecution functions of the MFCU may not be outsourced.  The proposed rule also requires MFCUs to employ a director to supervise all MFCU employees and require that MFCUs provide training for professional employees on Medicaid fraud and patient abuse and neglect matters.

Prosecutorial Authority – Technical amendments to prosecutorial authority have been proposed in the rule that permit the prosecution of patient abuse and neglect.  Under the proposed rule, MFCUs also maintain authority to make referrals to other offices with statewide prosecutorial authority and the State Attorney General.

Agreement with Medicaid Agency – The proposed rule requires that the memorandum of understanding (MOU) between the MFCU and Medicaid agency establish terms for consistent communication between the parties.  The parties must further review and update, if necessary, the MOU no less than every five years.

Definitional Changes – The proposed rule adds a definition for “fraud” to clarify that MFCUs have authority to investigate “any and all aspects of fraud” which include any action for which criminal or civil penalties may be imposed under State law.  CMS and the OIG continue to disallow FFP for investigations and expenditures for program abuse, which has been defined in the proposed rule as activities that do not meet civil or criminal penalty requirements and constitute only improper provider practices.  If overpayments have been identified with respect to program abuse, the MFCU is encouraged to refer the matter to the state Medicaid agency.

The proposed rule clarifies that a “health care facility,” which falls within the investigative scope of MFCU responsibilities, is a provider who receives payments under Medicaid and “furnishes food, shelter, and some other treatment or services to four or more persons unrelated to the proprietor in an inpatient setting.”  The definition of “provider” has also been modified to incorporate any provider required to enroll in a State Medicaid program including ordering and referring physicians.  Therefore, providers not furnishing the service in question can be subject to MFCU investigation and prosecution.  

To clarify MFCU duties regarding patient abuse and neglect, “abuse of patients” has been defined as willful infliction of injury, unreasonably confinement, intimidation or punishment with resulting physical or financial harm, pain or mental anguish.  “Neglect of patients” has been defined to mean willful failure to provide goods and services necessary to avoid physical harm, mental anguish, or mental illness.  Furthermore, the proposed definitions include acts that may constitute a crime under State law.

Reporter, Catherine Silas, Washington, D.C., +1 202 626 8976,

CMS Delays Stricter Reviews of Medicare Home Care Claims – CMS recently announced a delay in the broad implementation of a stricter review program for Medicare home care claims that launched on a demonstration basis on August 3, 2016.  CMS began the demonstration program to test whether a pre-claim review system would improve the identification, investigation, and prosecution of Medicare fraud occurring among home health agencies (HHAs) providing services to Medicare patients.  CMS stated that the demonstration would not “create new clinical documentation requirements” and that HHAs would submit the “same information they currently submit for payment,” but would do so “earlier in the process.”  Additionally, CMS stated it would be looking at whether this process would help reduce expenditures while maintaining or improving the quality of care provided by the HHAs.

On June 9, 2016, CMS announced that testing would begin in Illinois, with Florida and Texas to follow later in the year.  CMS had planned to expand the pre-claim review program to Massachusetts and Michigan starting in 2017.  Following the announcement of the program, the National Association for Home Care & Hospice (NAHC) warned CMS of problems with the pre-claim review program, specifically that it would violate the “standards of reasonableness, economy, and efficiency,” with “high administrative costs and operational burdens” and  would be “likely to create improper barriers to access to timely care.”  Senator Bill Nelson and Senator Marco Rubio also expressed concern in a letter addressed to CMS on September 1, 2016, stating that the pre-claim review demonstration may “restrict beneficiary access to timely services, divert clinical resources to paperwork management, and incur high administrative costs.”

Despite concerns regarding implementation of the demonstration, on August 3, 2016, CMS began the pre-claim review demonstration in Illinois.  The initial reports since implementation of the program have not been positive.  NAHC has referred to the program as “chaos,” and others have stated that the program has been “atrocious” for providers.

As a result, CMS announced on September 19, that “[b]ased on early information from Illinois, CMS believes additional education efforts will be helpful before expansion of the demonstration to other states; therefore, we will not move forward with initiating the demonstration in Florida in October.  This education effort will focus on how to submit pre-claim review requests, documentation requirements, and common reasons for non-affirmation.”  CMS says it “views these efforts as crucial to the long-term success of the demonstration for beneficiaries, providers, and the Medicare program.”

The new start dates for Florida, Texas, Michigan and Massachusetts have not been announced; however, CMS stated it will provide at least 30 days’ notice on its website prior to the program beginning in any state.  To view CMS’ update and information regarding the program in its entirety, click here.

Reporter, Kiel Yager, Sacramento, +1 916 3214811,

Lawmakers Join MedPAC in Speaking Out Against CMS Surgeon Data Collection Proposal – On September 16, 2016, approximately 112 congressional representatives submitted a letter to HHS Secretary Sylvia Matthews Burwell and CMS acting Administrator Andy Slavitt requesting that CMS not implement its proposal regarding surgeon time data collection. 

The proposal at issue was released by CMS in its 2017 Physician Fee Schedule Proposed Rule, published on July 15, 2016.  By way of background, under the misvalued code initiative in the 2015 Physician Fee Schedule Final Rule, CMS finalized a policy to transform all 10- and 90-day global codes to 0-day global codes, beginning in calendar year 2018.  Pursuant to this policy, CMS would have valued the surgery or procedure to include all services furnished on the day of surgery and paid separately for visits and services furnished after the day of the procedure.  Subsequently, however, Congress enacted Section 523 of the Medicare Access and CHIP Reauthorization Act of 2015 which prohibited CMS from implementing this policy and required that the agency gather data on visits in the post-surgical period that could be used to accurately value these services.

In the 2017 Physician Fee Schedule Proposed Rule, CMS proposed a three-part data collection strategy, which included:

  • Comprehensive claims-based reporting about the number and level of pre- and post-operative visits furnished for 10- and 90-day global services;

  • A survey of a representative sample of practitioners about the activities involved in and the resources used in providing a number of pre- and postoperative visits during a specified, recent period of time, such as two weeks; and

  • A more in-depth study, including direct observation of the pre- and postoperative care delivered in a small number of sites, including some Accountable Care Organizations (ACOs).

Pursuant to the first prong of CMS’s proposal, all practitioners would be required to submit claims with new G codes for each visit provided during the pre- and post-operative period of a global code, even though they are not paid separately for those services.  The new G codes would indicate the setting of the visit, whether it was furnished by a practitioner or clinical staff, whether it was typical or complex, and the visit’s length of time in 10-minute increments.  

On August 26, 2016, the Medicare Payment Advisory Commission (MedPAC) issued comments on CMS’s proposal, calling CMS’s proposal “too burdensome and costly for providers and CMS.”  Rather, MedPAC urged CMS to adopt a single-pronged approach of only collecting data on pre-and post-operative services from a sample of efficient providers who furnish global codes, with mandatory participation by the sampled providers.

Led by Reps. Larry Bucshon, M.D. (R-Ind.) and Ami Bera, M.D. (D-Calif.), approximately 112 congressional representatives also spoke out against CMS’s data collection proposal in a September 16, 2016 letter.  The lawmakers indicated that CMS’s proposal “disregards congressional mandate” and “will impose an undue administrative burden on the surgical community, disproportionately directing provider resources toward compliance and away from patient care.”

The congressional letter is available here.

Reporter, Isabella E. Wood, Atlanta, + 1 404 572 3527,


King & Spalding Medical Device Summit 2016 – King & Spalding will host its Medical Device Summit 2016 on October 5, 2016, at the Park Hyatt Washington, D.C.  The event will be held from 8:00 a.m. until 5:00 p.m. and will be followed by a networking reception.  This year features a new one-day format with two tracks of presentations to suit attendees’ needs.  Click here for more information and to register for the program.  

King & Spalding’s FDA & Life Science’s practice group will also host a dinner on October 4, 2016, at 6:00 p.m. to kick off the Medical Device Summit and welcome you to meet our new partners and counsel in the practice group.  It will be located on the rooftop terrace of our Washington, D.C. office.  We hope that you can join us!  Please click here for more information and to RSVP.