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

1. While state health reform efforts in Massachusetts and California have gained national media attention, virtually every state is working to improve some aspect of the health care system. The shaky economy has prompted several states to shift their reform efforts from reducing uninsured populations to addressing issues such as health care quality, medical cost trends and information technology, says Molly Voris, senior policy analyst at the National Governors Association. "These states are looking to address issues that don't require a huge up-front investment," she tells AIS.

Several states, for example, have launched initiatives against using Medicaid dollars to reimburse hospitals for services needed as result of a preventable error. States including Massachusetts, Pennsylvania and Minnesota now have "never-event" policies.

Here's a look at several other recent state health reform developments:

Reprinted from the Aug. 4, 2008 issue of HEALTH PLAN WEEK.

2. A plan by a group of surgeons and a corporation that owns hospitals to invest in an ambulatory surgery center (ASC) could generate prohibited remuneration, but HHS's Office of Inspector General (OIG) probably wouldn't impose sanctions, according to Advisory Opinion 08-08, posted July 25.

Although physician-hospital joint ventures can be vehicles for fraud and abuse, OIG says, hospitals face "a competitive disadvantage" vis-à-vis ASCs owned by physicians, who control referrals. That's why OIG created an exception to the anti-kickback law (known as a safe harbor) for ASCs that meet certain conditions. Among other things, the ASCs must be jointly owned by hospitals and general surgeons or surgeons who work in the same surgical specialty.

In the arrangement at issue in this opinion, all the physicians are orthopedic surgeons, OIG explains. But the arrangement has other key mitigating factors, OIG notes:

This opinion can aid providers investing in ASCs because it shines at least some light on the one-third test, says South Bend, Ind., attorney Bob Wade. "This [opinion] helps because it emphasizes the fact that [a venture] could have a few [surgeons who don't pass the one-third test] and still be an acceptable arrangement," he says. A physician either should be investing directly, or, if he/she is investing through a group, every member must meet the one-third test, Wade explains. Otherwise, "it could be used as a mechanism to compensate physicians who don't meet it. A group practice would divide out the profit to all, including those who don't qualify."

OIG has said in the past that it's fine if some investors don't pass the test, but OIG has not been more specific. In this opinion, however, OIG says the four (out of 18) surgeons "comprise a small portion of the surgeon investors," Wade notes. "There is still a struggle with how many not meeting the test would be unacceptable. Here we have 22.2% of the investors who don't meet the test," so maybe that can be used as a gauge.

To view the advisory opinion, visit AIS's Government Resources; click on "OIG Advisory Opinions."

Reprinted from the Aug. 4, 2008, issue of REPORT ON MEDICARE COMPLIANCE.

3. New electronic-prescribing requirements for physicians participating in Medicare will have widespread repercussions in the commercial marketplace, according to health plans and pharmacy benefit managers (PBMs) that are launching their own e-prescribing initiatives.

Financial incentives for physicians to e-prescribe are part of the Medicare law enacted July 15 to avert a physician payment cut under Medicare. The provision is expected to prompt more private health plans to push e-prescribing among providers.

"As a purchaser of health care services for more than 44 million Americans, Medicare's e-prescribing requirement is likely to encourage use of e-prescribing and other health information technology among others, including FORTUNE 500 employers, small businesses, labor unions and other public programs," Scott Serota, president and CEO of the Blue Cross and Blue Shield Association, said in a July 21 prepared statement.

HHS on July 21 explained how the e-prescribing provision would work. For two years, beginning in 2009, Medicare will offer a 2% incentive payment to eligible physicians. The financial incentive will drop to 1% in 2011 and 2012, and to 0.5% in 2013.

HHS said it has not yet identified how many or what percentage of prescriptions a physician will need to submit electronically to qualify for the incentives. Physicians who do not use the technology will see Medicare reimbursements reduced by 1% in 2012, 1.5% in 2013 and 2% in 2014. Some providers will be exempt from the requirements, however.

Medicare is expected to save as much as $156 million over five years via avoided adverse drug events, according to HHS.

Other stakeholders hailed this and other elements of the provision.

"From a patient's perspective, e-prescribing is the most important issue in the Medicare bill because it saves lives and saves money," PBM trade group Pharmaceutical Care Management Association (PCMA) said in a prepared statement in mid-July. "This is a historic step forward for e-prescribing as the new requirement in Medicare will now lead to broader adoption of overall health care information technology."

Blue Cross and Blue Shield of North Carolina (BCBSNC), for one, last month expanded its e-prescribing program. On July 22, the plan said it had launched an e-prescribing Web site through which providers will have access to free Web-based software, vendor sources for discounted hardware and connectivity, as well as other e-prescribing technology options.

Since launching its pilot program in 2006, the Blues plan says, more than 4 million electronic prescriptions have been written. The insurer is partnering with Community Care of North Carolina and its 14 regional health care networks.

BCBSNC also is offering a one-time $1,000 incentive to network providers who want to participate in the program. To qualify for the incentive, providers must be registered with a certified e-prescribing vendor and must access medication history for a minimum of 20 patients in the fourth quarter of 2008. Incentives will be paid in first-quarter 2009. Any pharmacies not able to accept electronic prescriptions also will qualify for a $1,000 incentive if they become electronically enabled by the end of 2008.

In return, health plans estimate that e-prescribing can generate cost savings of roughly $250 per doctor per month because of increased use of generics, avoidance of unnecessary or inappropriate prescriptions and other inefficiencies.

While such benefits of e-prescribing have long been known, health plans generally have been waiting for Medicare to make the first move.

"Many commercial payers have been waiting to see what incentives CMS would offer," says Anthony Schueth, CEO and managing partner of Point-of-Care Partners, a Coral Springs, Fla.-based consulting firm.

"What they've proposed is a different type of model that could be used as a benchmark for private health plans," he says. Commercial payers, Schueth explains, will need to determine if they are willing to contribute additional incentives or if some sort of financial penalty might make sense.

Reprinted from the Aug. 1, 2008, issue of DRUG BENEFIT NEWS.

4. Lifetime insurance caps would be raised to $10 million under the Health Insurance Coverage Protection Act, a bill introduced by Rep. Anna G. Eshoo (D-Calif.). H.R. 6528, introduced July 17, would stipulate that the lifetime cap on a group health plan would be $5 million for the first two years and $10 million in years three and four. It also would provide an annual adjustment to a group insurance plan's lifetime cap based on the Consumer Price Index in subsequent years. It exempts health plans offered by small employers — fewer than 20 employees — but would require health plans to meet the parameters of the bill at the employer's request. America's Health Insurance Plans (AHIP) opposes the bill on grounds that it could raise premium rates and does not address rising health care costs.

Reprinted from the Aug. 4, 2008 issue of HEALTH PLAN WEEK.

5. Three former employees of Kendall Regional Medical Center in Miami pleaded guilty July 23 to conspiring to defraud the facility of $5 million, says the U.S. Attorney's Office for the Southern District of Florida. As part of their plea, Joanna Delfel, Victor Garcia and Sylvia Oramas admitted they used the hospital's computerized supply management system so it would issue payments to two medical supply vendors for medical supplies fraudulently ordered and never delivered. They then created phony purchase orders and recorded that supplies had been delivered.

Reprinted from the Aug. 4, 2008, issue of REPORT ON MEDICARE COMPLIANCE.

6. Qualified Independent Contractors (QICs) did not always meet the timeliness, correspondence and data-entry requirements for Part A and Part B reconsiderations they received between May 2005 and July 2006, OIG says in an Office of Evaluations and Inspections report (OEI-06-06-00500) posted July 18. Part A QICs met the 60-day processing deadline, but Part B contracts did not for 58% of cases, OIG found. The QICs entered inaccurate information into the Medicare appeals system for 54% of the reconsiderations, the report says. OIG says CMS should (1) add error rates to its annual reviews of QICs, (2) validate the appeals-system data and (3) monitor the length of time it takes contractors to transfer paper case files to QICs. CMS said it has taken several steps to address the issues. Visit AIS's Government Resources; click on "OIG's Office of Evaluations and Inspections."

Reprinted from the Aug. 4, 2008, issue of REPORT ON MEDICARE COMPLIANCE.

7. Maine Gov. John Baldacci (D) has created a state task force to examine why use of hospital emergency rooms in the state is significantly higher than the national average, The Bangor Daily News reported July 17. Maine's rate of emergency department use increased by nearly 20% between 1999 and 2005 and is now 43% higher than the national average, according to the article. The study, which will be conducted by the Muskie School of Public Service at the University of Maine, will try to identify problems within the health care system that drive people to seek routine medical care in emergency departments. The report is expected to be ready by December.

8. Express Scripts Inc. on July 29 said that it and CIGNA Corp. would jointly pay $27 million to settle a lawsuit by New York state that alleged Express Scripts engaged in a "drug switching" scheme in its $1 billion contract to provide PBM services to New York state employees. Express Scripts provided the services under the Empire Plan through a contract with CIGNA. Neither company admitted any wrongdoing in the settlement. It stems from a 2004 lawsuit in which the New York attorney general's office alleged, among other things, that Express Scripts engaged in "fraud and deception" to induce physicians to switch patients' drugs in order to receive bigger rebates from drug manufacturers. Express Scripts said it "does not recommend switches to higher-cost drugs and does not accept pharmaceutical manufacturer funding for such programs." Express Scripts also said its business practices already comply with "essentially all requirements" of the settlement, and that only minor adjustments in certain procedures will be needed. Express Scripts said it had previously reserved funds sufficient to pay its share of the settlement, and that there will be no effect on the company's results. CIGNA and Express Scripts did not disclose their respective portions of the settlement.

Reprinted from the Aug. 1, 2008, issue of DRUG BENEFIT NEWS.

9. House Small Business Committee Chairwoman Nydia M. Velázquez (D-N.Y.) and Rep. Joe Pitts (R-Pa.) introduced the "Small Business Cooperative for Healthcare Options to Improve Coverage for Employees'' (Small Business CHOICE) Act of 2008. According to the committee, the bill takes elements from the leading presidential candidates' health reform proposals and would "help curb the rising costs of health insurance plans for entrepreneurs." The committee added that the legislation would lessen the volatility of premiums and add "important incentives helping small firms expand coverage for working families." The bill would offer a refundable tax credit of 65% to small businesses, those with less than 100 employees, that offer health insurance to employees. The legislation also would reduce risks for health plans by allowing small firms to form voluntary health cooperatives through which they can pool employees. The committee said "self-employed individuals would save $5,000 per year on health coverage costs," and other small firms would save more than 34%.

Reprinted from the July 28, 2008 issue of HEALTH PLAN WEEK.

10. The Connecticut Health Reinsurance Association, the state's high-risk pool, will receive a $1.18 million grant from HHS. The department awarded more than $49 million to 30 states to help them run their high-risk insurance pools, the Hartford Courant reports. Connecticut's pool has 2,554 policies in force, the newspaper said.

Reprinted from the July 28, 2008 issue of HEALTH PLAN WEEK.

11. The prices paid for drugs used by Medicare-Medicaid dual-eligible beneficiaries under Part D are significantly higher than the prices paid by Medicaid for the same drugs, according to a July 2008 report by the House of Representatives Committee on Oversight and Government Reform. The report found that Part D beneficiaries are paying an average of 30% more for drugs than Medicaid beneficiaries, and this is causing "large windfalls for drug manufacturers." "In total, these manufacturers received $3.7 billion more from the Medicare Part D insurers in 2006 and 2007 than they would have received if the dual-eligible beneficiaries had obtained the drugs through Medicaid," the report said. Visit http://oversight.house.gov/documents/20080724101850.pdf.

Reprinted from the August 2008 issue of MEDICARE PART D COMPLIANCE NEWS

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New • Health Plan Facts, Trends & Data 2008-2009 • Health Plan Enrollment Stats: Comparative 5-Year Market Share, Trends, Data • High-Risk Areas in Medicare Billing • AIS's HIPAA Compliance Center Best Sellers • 2008 Managed Medicare & Medicaid Factbook • AIS's Directory of Health Plans • Health Plan Pay-for-Performance Programs: The Next Generation See full listing of products at AIS Marketplace