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

3. In a case that highlights the many weapons in the government’s enforcement arsenal, the University of Chicago Medical Center has agreed to pay $7 million to resolve alleged wrongdoing in its neonatal intensive care unit (NICU). The case began with a federal False Claims Act lawsuit filed by two whistleblowers, which was thrown out by a judge. The state then pursued the hospital under its false claims law, but abandoned that approach and then negotiated a hefty settlement under a consumer fraud law based on alleged licensing violations.

The federal False Claims Act lawsuit was originally filed in U.S. District Court in Chicago in 2003 by registered nurses Donald Raymer and Michael Groschle, who worked at the time in the NICU and intermediate care nursery at University of Chicago Medical Center. The two alleged that the number of patients in the NICU violated licensing regulations. The Department of Justice did not intervene in the case, which was dismissed by the U.S. District Court on the grounds that the whistleblowers failed to plead their case with “particularity,” pursuant to Federal Rules of Civil Procedure Sec. 9(b).

So Illinois Attorney General Lisa Madigan took over, wielding the state false claims law — the Illinois Whistleblower Reward and Protection Act — against the hospital over Medicaid claims for the NICU babies. But after closer inspection of the allegations, the state AG realized the case should be handled under the consumer fraud law, not the false claims law. In 2006, the AG alleged that University of Chicago Medical Center violated Illinois licensing regulations by exceeding its NICU capacity and routinely placing two or more NICU patients in bed spaces designed for one.

More hospitals may experience this kind of enforcement action as state budgets grow tighter, says Chicago attorney Louis Glaser, with Katten Muchin Rosenman. “This is a vehicle for state AGs to bring cases they view as fraud,” says Glaser, who was not involved in this case.

Hospitals are licensed by the Illinois Department of Public Health, which requires them to abide by state laws and regulations. The state dictates the amount of space allocated per NICU patient. Each infant in intermediate and intensive care nurseries must be separated by four to six feet, the complaint states. There must be 80 to 100 square feet of bed space and 150 square feet of floor space for each NICU infant. Every infant bed needs 16-20 electrical outlets, three to four oxygen outlets, three to four compressed air outlets and three to four suction outlets.

According to the state’s complaint, University of Chicago Medical Center put two or more radiant warmers, incubators or open cribs containing ill babies in a bed space designated for one baby between 1997 and July 2005. As a result, the two babies were “forced to share outlets and medical equipment, including medical air, vacuum and oxygen sources, bed-side supplies and needle and biohazard receptacles,” the AG alleged. Sometimes infants sharing the same space had the same bed number and were differentiated only by the letters “A” and “B.”

“With two babies in a single bed space, it was virtually impossible to separate each baby’s equipment, medications, soiled linens, etc.,” the complaint states. “Medical charts of double-bunked babies were intermingled and orders were carried out on the wrong babies; breast milk and unlabeled ambu bags were inadvertently used on the wrong babies.”

Capacity problems were alleviated when University of Chicago opened another children’s hospital, Comer Children’s Hospital, in the summer of 2005.

John Gallo, an attorney for the University of Chicago Medical Center, says “the hospital did what it thought best to take care of the demand for level three care for the babies in its network.” The hospital’s “infrastructure” was limited, however, until it opened Comer Children’s Hospital, says Gallo, with Sidley & Austin.

The settlement amount adds up to single damages for the Medicaid reimbursement collected by the hospital for services provided to the double-bunked babies. Of the $7 million settlement, the AG has disbursed $5.135 million to eight not-for-profit community health care providers to pay for preventive medical care for low-income women facing chronic and long-term health issues that are linked to problematic births.

The rest goes to the whistleblowers who got the ball rolling and to the federal government because it foots half the bill for Medicaid.

Reprinted from the July 26, 2010, issue of REPORT ON MEDICARE COMPLIANCE

4. Under provisions created by the health reform law, individuals can now appeal decisions, including claims denials and rescissions, made by their health plans, according to regulations issued by the departments of HHS, Labor and Treasury. The new rules allow members to appeal decisions directly to their insurers or if necessary to an external board. Self-funded and fully insured plans are affected, although “grandfathered plans” are exempt. The regs apply to plan or policy years starting after Sept. 23, 2010. To view a fact sheet on the regulations, click here.

Reprinted from the July 26, 2010, issue of HEALTH PLAN WEEK

5. In the Medicare Fraud Strike Force’s largest fraud takedown to date, 94 people have been charged in various schemes in five cities, HHS and DOJ officials said July 16. The defendants — who are physicians, nurses, health care company owners and executives, among others — are charged with conspiracy to defraud Medicare, criminal false claims and violations of the anti-kickback statute. The practices involved include physical therapy and occupational therapy, home health care, HIV infusion and durable medical equipment (DME) businesses. In Baton Rouge, La., 31 people were charged for their alleged involvement in different DME schemes that resulted in about $32 million billed to Medicare. In Miami, 24 defendants were charged for their alleged participation in schemes that led to about $103 million in false claims. Twenty-two people in Brooklyn, N.Y., were charged for their alleged involvement in $78 million in false billings for various services. Eleven of the defendants were from Detroit and allegedly billed for $35 million in false home health services. And four people in Houston were charged for their alleged roles in a scheme to submit $3 million in false claims for DME. The strike force operations in the five cities are part of a joint HHS-DOJ effort that started in May 2009.

Reprinted from the July 26, 2010, issue of REPORT ON MEDICARE COMPLIANCE

6. A pediatric practice in Connecticut agreed to pay more than $65,000 to resolve allegations that it submitted improper billings to Medicaid in violation of the False Claims Act, said the U.S. Attorney’s Office for the District of Connecticut. Milford Pediatric improperly used a “special services” code for office visits conducted on days when the office is usually closed or after normal business hours, the feds explain. Milford allegedly routinely billed Medicaid for the special add-on code when the practice was not closed, but was open for business and regularly scheduling patients. The conduct occurred between Jan. 1, 2006, and March 31, 2009, the feds say. Milford did not admit liability in entering the agreement. Another pediatric practice in Connecticut settled similar allegations in April. Visit www.justice.gov/usao/ct.

Reprinted from the July 2010 issue of The HCCA-AIS MEDICAID COMPLIANCE NEWS

7. New Mexico Gov. Bill Richardson (D) said the state is moving forward on several recommendations made by its Health Care Reform Leadership Team, including creating a health insurance exchange. According to the report, the team strongly supported the idea of the state developing its own exchange instead of using one that would be operated by the federal government. Richardson also gave the green light to creating an Office of Health Care Reform and to determining which state statutes require amendment or enactment to be in compliance with the reform law. The complete report can be found here.

Reprinted from the July 26, 2010, issue of AIS's HEALTH REFORM WEEK

8. Oklahoma Insurance Commissioner Kim Holland (D) asked the state Supreme Court to halt a 1% fee on health insurers that was passed by the legislature in May, The Oklahoman reported July 21. Holland asked the court if the measure that created the fee was unconstitutional since it could be considered a tax increase, according to the newspaper. Under state law, an increase in taxes requires a three-fourths legislative majority, which the measure did not receive, the publication reported. According to the newspaper, the bill was designed to provide money for the state’s Medicaid program along with federal matching funds. The fee would generate $78 million a year to be matched with about $190 million from the federal government, The Oklahoman added.

Reprinted from the July 26, 2010, issue of AIS's HEALTH REFORM WEEK

9. The Illinois Department of Insurance has applied for a $1 million grant from HHS to improve oversight of insurance premium increases in the state, The Associated Press reported July 13. On June 7, HHS made $51 million in grants available to states under the reform law to “strengthen” oversight of the insurance premium review process.If the state’s application is approved by HHS, the money could be made available as soon as next month, the AP reported. Michael McRaith, director of the Illinois department, told the news service that the grant would give insurance regulators more opportunities to protect families and employers in the state from “abusive premium increases.”

Reprinted from the July 2010 issue of The HCCA-AIS MEDICAID COMPLIANCE NEWS

10. Georgia is blaming budget shortfalls while Arizona cites health reform for skyrocketing insurance premiums in their state-run health insurance programs. Georgia officials said the State Health Benefit Plan, which pays insurance claims for about 680,000 state workers, retirees and dependents, could run out of money by early next spring if no “immediate action” is taken, according to the Atlanta Journal-Constitution. A spokesperson for the Department of Community Health (DCH) told the Journal that the plan’s 2008 surplus of $472 million has been diminished by budget cuts and workforce reductions to just $33 million in 2009. To help boost the plan’s surplus, DCH officials said they plan to raise premiums by about 10% in January, according to the newspaper. In Arizona, state and university employees with dependents can expect to see their premiums rise as much as 37% beginning Jan. 1, reported the Arizona Republic. In a letter to 135,000 state and university employees, the Department of Administration is citing the health reform law as the reason for the increase in premiums, according to the publication. According to the Republic, some state lawmakers are questioning Gov. Jan Brewer’s (R) decision to send out letters blaming health reform for the increases. Rep. Kyrsten Sinema (D), who sat on President Obama’s health reform task force, told the newspaper that the letters were politically motivated and are not factually accurate.

Reprinted from the July 26, 2010, issue of HEALTH PLAN WEEK