Government News
of the Week:
Medicare Compliance, Medicare Advantage and Part D, and Other Federal and State Developments

1. CMS on April 14 proposed adding eight more “never-events” to its list of conditions that it will not pay for if a patient acquires them during a hospital stay. The agency said the eight additional “never events” include hospital-acquired surgical site infections following certain elective procedures, Legionnaires’ disease, extreme blood-sugar derangement, Iatrogenic pneumothorax (collapse of the lung), delirium ventilator-associated pneumonia, deep vein thrombosis/pulmonary embolism (formation/movement of a blood clot), staphylococcus aureus septicemia (bloodstream infection) or clostridium difficile associated disease. Separately, CIGNA Corp. said that as of Oct. 1, it will no longer reimburse hospitals for patient expenses related to CMS’s initial set of “never events.” Editor’s note: HPW will sponsor an audioconference on health plans’ “Never Events” strategies on Tuesday, May 13 at 1 p.m. Eastern time. Registration will begin soon at www.AISHealth.com.

Reprinted from the April 21, 2008, issue of HEALTH PLAN WEEK.

2. A recent case in New York highlights the importance of policing vendor relations, especially at nonprofit hospitals. A general contractor for residential and commercial buildings pleaded guilty April 11 to conspiring to defraud New York Presbyterian Hospital (NYPH) by paying kickbacks to the hospital’s purchasing official to steer contracts its way.

Aaron Weiner, who owns Aaron Weiner Construction Inc. (AWC), pleaded guilty to participating in the scheme, which allegedly took place from June 2004 to March 2005. He faces five years in prison and a $250,000 fine.

The feds say that Weiner acted as a “conduit” in the plan to bilk NYPH out of millions of dollars. The owner of two New York City-based construction companies allegedly paid Weiner to pose as a consultant in order to pay kickbacks to NYPH’s senior purchasing official. The purchasing official awarded construction contracts totaling nearly $20 million to the companies. To conceal the kickbacks, the payments were wired to AWC, and Weiner wrote checks to a shell company formed by the purchasing official in his mother’s name, the feds say. About $1 million in kickbacks went to the purchasing official, they say.

The company owner and purchasing official were not named in the information filed against Weiner. The feds say the investigation is ongoing and declined to provide additional information at this time.
The hospital did not respond to requests for comment.

Lawyers contend that hospitals invite trouble unless there is oversight of the contracting process and the people who potentially stand to benefit from it.

“Particularly when an organization is engaged in negotiations that involve multimillion dollar contracts — whether it is for supplies, construction, a piece of state-of-the-art equipment, [electronic medical records], etc. — the organization must have effective checks and balances or internal controls in place to assure itself and governance that the processes will serve the best interests of the organization at all times,” says Don Koenig, vice president and assistant general counsel for Catholic Healthcare Partners (CHP) in Ohio. CHP distributes information about its corporate responsibility program to its agents, vendors and contractors.

The risks are particularly acute for nonprofits. “Monitoring individuals who have expenditure responsibility is important from a number of respects,” says Todd Greenwalt, a lawyer with Vinson & Elkins LLP in Houston. “First, the hospital’s executive management and the board of directors owe a fiduciary duty to the hospital to oversee and protect the use of hospital assets to ensure they are used to accomplish charitable purposes. Second, if the hospital is viewed to endorse an activity that improperly enriches a private party, through either direct action or lax oversight, the IRS could assert that the hospital has violated either the private inurement proscription if the enriched party is an insider, or the private benefit limitation, placing the hospital’s exempt status at risk.” It seems unlikely that the IRS would take that action here, he adds.

Oversight May Increase as Contract Value Rises

Koenig says large health systems may have tiered systems for contracting that increase the oversight as the value of the contracts increases. “Generally, large systems might have a threshold level of contracting that requires larger dollar contracts to include multiple bids, or even a formal [request for proposal] process with a review-and-evaluation committee that includes financial, legal, logistics and subject-matter experts to ensure that important, large-dollar acquisitions receive the scrutiny, analysis and broad consensus that will protect the organization,” he says.

If a failure of control happens anyway, organizations should “undertake a candid, thorough assessment to determine whether the control was not designed properly, not implemented properly or was intentionally overridden. Once the causes are identified, corrective action can be undertaken to strengthen and periodically test those controls to prevent recurrence,” says Koenig.

Reprinted from the April 21, 2008, issue of REPORT ON MEDICARE COMPLIANCE,

3. The California Department of Managed Health Care (DMHC) could force health plans in the state to reinstate coverage for thousands of individuals. The department has ordered re-reviews of each rescission over the past four years by a DMHC-selected independent arbiter. The move comes as part of an ongoing investigation into the rescission practices and policies of California-based health plans.

On April 17, the department said it ordered three health plans to immediately reinstate policies for 26 consumers who it determined had their coverage wrongfully rescinded. The department said it ordered the reinstatement as part of an investigation of the rescission practices of five largest health plans offering individual coverage in California, among them Anthem Blue Cross, a WellPoint, Inc. unit (formerly Blue Cross of California), Blue Shield of California and Kaiser Permanente.

The arbiter, according to DMHC, will determine remedies, such as payment of medical care and premiums, for those who are found to have been wrongly rescinded.

DMHC said that “each plan must immediately institute uniform business practices for rescission” to ensure a fair process for future enrollees. The agency said it already has taken a number of steps to protect patients from wrongful rescission, which include assisting patients who contacted its HMO Help Center to regain their coverage.

According to the department, full details of the investigations and potential penalties will be released within the next few weeks.

Reprinted from the April 21, 2008, issue of HEALTH PLAN WEEK.

4. Fred Steinberg, M.D., a Florida radiologist, and the system of imaging centers that he owns will pay $7 million to settle allegations of health care fraud as well as Stark law and anti-kickback statute violations, the U.S. Attorney’s Office for the Southern District of Florida said April 14. The suit was filed in 2002 by whistle-blower David Clayman, M.D., a former employee of one of University MRI’s (UMRI’s) facilities. Clayman will receive $1.75 million in the settlement. The feds alleged that some CT scans were not performed, though the services were billed and reported to the patients’ doctors as if they were. The feds also allege that other services performed were not medically necessary and not ordered by physicians. The settlement also resolves allegations that, in exchange for patient referrals, physicians received “financial inducements…[in] the form of medical directorship, clinical research, employment, facility use, and equipment lease agreements that exceeded fair market value or otherwise failed to comply with federal law,” the feds say. A firm representing UMRI noted that the settlement agreement states that the company denies the allegations, but settled to end the uncertainty of protracted litigation. The firm also says in a statement that the consulting agreements were terminated prior to the feds’ investigation, and that the facility and lease agreements were commonly used by imaging centers across the country. Visit www.usdoj.gov/usao/fls.

Reprinted from the April 21, 2008, issue of REPORT ON MEDICARE COMPLIANCE,

5. The permanent, national recovery audit contractors (RACs) will be more provider-friendly because of certain CMS requirements imposed on the contingency-fee contractors, according to the director of Medicare program integrity for CMS. For example, RACs are required to host Web sites that list, in real time, all claims under scrutiny; limit the number of medical records requested from providers every month (the number has not yet been set); employ a medical director; and engage in provider outreach.

“We are requiring RACs to be much more aggressive about educating providers,” Kim Brandt, director of program integrity, said April 14 at the Health Care Compliance Assn.’s Compliance Institute in New Orleans.

The various safeguards were largely a response to complaints raised by the provider community. “Hopefully, this will minimize a lot of the angst about” the RACs as they begin setting up shop in May in states around the country, she said.

RACs, which are the first Medicare auditors paid only when they find overpayments and, to a lesser extent, underpayments, began in 2005 as a three-year pilot in New York, California and Florida (South Carolina and Massachusetts were added last year). There have been glitches along the way, but CMS considers the RACs a big success because they identified $440 million in improper Medicare payments. Starting in May, CMS is rolling out the RACs nationally, and hospitals should be preparing for their medical-record demands.

Brandt listed four major myths about RACs and then countered them:

(1) Myth: RACs make up their own rules. Fact: RACs apply the same policies as other Medicare contractors.

(2) Myth: RACs use unqualified staffers. Fact: RACs use nurses, therapists, coders and medical directors.

(3) Myth: All RAC reviews are conducted by black-box computer edits. Fact: Many RAC reviews involve a medical-record review by a clinician.

(4) Myth: RACs will replace Medicare quality improvement organizations (QIOs). Fact: “The job of educating hospitals about how to avoid submitting” erroneous claims will still be performed by QIOs and Medicare fiscal intermediaries/Medicare administrative contractors, she said. (However, CMS has ended the Hospital Payment Monitoring Program, which was run by QIOs, so it’s not clear at the moment what role QIOs will play in provider education.)

“RACs are not quite the rogues they are portrayed to be,” Brandt maintained.

Fort Lauderdale, Fla., attorney Gabe Imperato says he agrees that RACs don’t do the extreme things described in the myths, but says their reviews are affected by their incentive payments. For example, “I do not believe they do black-box reviews, but I know their reviews are influenced by the very different incentives they have in the game of recovery. And I do not believe they use unqualified staff, but I bet many of the staff recruits are not nearly as experienced as former CMS contractors were,” says Imperato, who is with the law firm of Broad and Cassel.

“These are not public servants attempting to run a fair public health program. And they are not likely rogues either,” he says.

Reprinted from the April 21, 2008, issue of REPORT ON MEDICARE COMPLIANCE,

6. Massachusetts’ Commonwealth Health Insurance Connector said it approved a 5% increase to the monthly premium for “affordable” insurance plans that renew in July 2008. The agency announced the new levels for the next 12 months on April 17. Also, the penalty for not having coverage increased to $912 if a person is uninsured for the entire year and if the state deems insurance affordable for that person. Powers said individuals with annual income of more than $52,500 would be considered able to afford coverage — regardless of the premium. And an individual earning between $37,501 and $42,500 annually would be required to purchase coverage if the premium was $220 per month or less. The Connector said 340,000 residents are newly insured since coverage became mandatory, “more than half of its uninsured.”

Reprinted from the April 21, 2008, issue of HEALTH PLAN WEEK.

7. The HHS Office of the Inspector General (OIG) is proposing new compliance program guidance for nursing facilities that would supplement a CPG issued in 2000, according to an April 16 notice in the Federal Register. “The proposed notice takes into account Medicare and Medicaid nursing facility payment systems and regulations, evolving industry practices, current enforcement priorities (including the government’s heightened focus on quality of care), and lessons learned in the area of nursing facility compliance. When published, the final supplemental CPG will provide voluntary guidelines to assist nursing facilities in identifying significant risk areas and in evaluating and, as necessary, refining ongoing compliance efforts,” it says. The fraud-and-abuse risk areas OIG lists include quality of care, submission of accurate claims, the anti-kickback statute, physician self-referrals and the HIPAA privacy and security rules. Some other compliance considerations are an ethical culture, regular reviews of compliance program effectiveness and communication to decision makers, OIG says. To read the proposed CPG, visit AIS’s Government Resources at the Compliance Channel at www.AISHealth.com; click on “2008 Federal Register.”

Reprinted from the April 21, 2008, issue of REPORT ON MEDICARE COMPLIANCE,

8. The California Supreme Court said that it would not hear an appeal in the case of Hailey v. California Physicians’ Service regarding an appellate court ruling that limits Blue Shield of California’s ability to rescind policies of individual members. The ruling effectively makes the decision state law and will likely affect pending lawsuits against other insurers that have come under fire for their rescission policies. Also, representatives of the California Department of Managed Health Care (DMHC) met with five of the state’s largest health plans to discuss a brief it had filed with the state Supreme Court on the case, according to Capital Weekly.

Reprinted from the April 2008 issue of The AIS Report on Blue Cross and Blue Shield Plans.

9. A ruling in favor of Blue Cross Blue Shield of Texas was upheld by the Texas Court of Appeal. The health plan was sued by Robert Cunningham, whose wife, Patricia Cunningham, had wrongful death coverage, according to Cunningham’s counsel, Katherine Youngblood. Although the wife was insured by the Texas Health Insurance Risk Pool, the state’s high-risk pool, the policy was administered through the Texas Blues plan. The wife died from complications of malnutrition that could have been avoided with the use of a feed tube, Youngblood said. But the alleged wrongful conduct of the insurer was found to be too remote to constitute legal causation as a matter of law. Instead, the Blues plan’s case management duties were limited to assessing continuing needs in catastrophic and chronic high-cost cases, and discussing more cost-effective alternative methods of care with the treating physicians, Youngblood said.

Reprinted from the April 2008 issue of The AIS Report on Blue Cross and Blue Shield Plans.

10. Blue Cross Blue Shield of Michigan is being sued by Oakland County, Mich., which alleges that the plan overcharged the county more than $9 million in hidden access fees. Most recently, Oakland County Circuit Court Judge Nanci Grant awarded $3,000 in costs from the Michigan Blues plan in mid-March for mislabeling documents in the case. The county lawsuit charges the Blues plan with adding about 4% or $1.5 million a year to all claims dating back to 2001, according to MLive.com. The alleged access fees are in addition to the $2.2 million annual fee the county pays to the Blues to administer its health plan for about 4,000 employees and 1,000 retirees. The Michigan Blues plan is prepared to defend itself in court and since 2001 has saved the county nearly $170 million in physician and hospital costs, says Michigan Blues spokesperson Helen Stojic.

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